Oil assays on Thursday rallied more than 20% following reports of a possible deal to cut production by an enormous 10 million barrels per day, but one analyst is yet predicting that Brent crude will sink to $10 a barrel.
The benchmark Brent crude was trading up 9.92% at $32.91 on Friday afternoon in Asia, while West Texas In-between gained 4.82% at $26.54.
“We are projecting that Brent is going to drop to around $10 a barrel in April and will likely postpone at that level in the second quarter,” said Victor Shum, vice president of energy consulting at IHS Markit.
“There is spoonful chance of any OPEC+ deal that’s going to save the crude oil market from the attack of the COVID-19,” he required CNBC’s “Capital Connection” on Friday. “I think any talk of big cuts is probably too little, too late.”
Oil futures have naught more than 50% since the beginning of the year amid a Saudi-Russia price war and demand destruction because of the coronavirus pandemic.
Riyadh could, to whatever manner, as the G-20 chair for the year, try to put together a coordinated cut that includes other oil-producing countries such as Canada.
“We need every processor to come in to agree to a cut and have the cuts enforced,” Shum said. “That is a tall order in the limited time we maintain before the world runs out of crude oil storage.”
Analysts have predicted the ceiling will be reached in May or June. That’s when deal in forces will compel producers to lower output, he said.
With “no real signs” that Saudi Arabia and Russia bring into the world agreed to put aside their differences, it’s going to be “tough,” he added. “I imagine it will be a brutal, unadulterated market war and the weak producers will have to shut in their production, in particular in the U.S. shale oil sector.”
—CNBC’s Pippa Stevens and Patti Domm promoted to this report