NEW YORK (AP) – Goldman Sachs is warning of another sharp drop in oil prices, saying some oil producers are eventually going to have to shut some wells because of dramatic decline in demand due to the coronavirus outbreak.
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Goldman says demand for jet fuel and gasoline is deteriorating as governments restrict travel or would-be travelers stay home. This will result in storage for fuel filling to capacity, which in turn will result in a glut of crude oil, forcing a sharp pullback in production.
Analysts at Goldman say Brent crude, the international benchmark, will remain around $20 in the second quarter — down from $29 a barrel now — but the price of the U.S. benchmark should drop “well below $20 a barrel. U.S. crude is trading around $23.70 a barrel Thursday morning.
Global demand is expected to fall by 10.5 million barrels a day in March and 18.7 million barrels a day in April. While oil producers such as OPEC and Russia might try to offset that with production cuts, “We expect a demand shock of this magnitude to overwhelm any supply response,” the Goldman analysts say.
In their report, the analysts say that once demand comes back, the surge in oil prices could be dramatic because reversing a shut-in of production isn’t easy, and there could be a shortage once the existing supplies of jet fuel, gasoline and crude are used up.
Chutzpah that local stations haven’t gone down to a $1 a gallon yet . Someone should investigate . At times like these us consumers should see the relief
I paid $1.82/gallon for gasoline earlier this week; hopefully, it will go down to below $1.50.
Get a real education. There are fixed costs that can far exceed the product cost. And those fixed costs have to be spread out over the expected amount of product to be sold. If the amount of product sold is now a third of usual, then the allocated amount of the fixed cost is going to be 3x as much.
Close to $1 per gallon is taxes which are per gallon and not by % so that does not go down with lower oil prices. Also it takes a couple of weeks for oil price changes to make their way down the supply chain.