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Fitch Solutions: Dual demand & supply shock puts oil industry in severe stress

Oil&Gas Materials 3 April 2020 10:43 (UTC +04:00)
Fitch Solutions: Dual demand & supply shock puts oil industry in severe stress

BAKU, Azerbaijan, April 3

By Leman Zeynalova - Trend:

Dual demand and supply shock puts the oil and gas industry in severe stress, Trend reports with reference to Fitch Solutions Country Risk and Industry Research (a unit of Fitch Group).

Brent price is forecast at $30 per barrel average for 2020, according to the report released by Fitch Solutions.

“We forecast global capex reductions of at least 20 percent to prior estimates, to $94 billion for 2020. Upstream focus is on existing projects and only highest margin new projects. We are not factoring in an OPEC+ agreement in 2020,” said the company.

Fitch Solutions believes that months of stock building will mute price upside, if a tentative economic recovery begins in Q4 2020.

“Out of the eight industries, within which we have made downward forecast revisions, Autos, Oil & Gas and Consumer & Retail (specifically the consumer spending segments that are deemed non-essential) are the sectors where we project the deepest contraction taking place,” the company said.

Fitch Solutions has made upward forecast revisions for Healthcare on account of the large emergency spending in major markets as the sector globally battles with the spread of the virus.

“We have also revised up our forecasts for household spending on food, as well as enterprise and government spending on Cloud storage and note upside for investments in cybersecurity. Emergency spending and economic stimulus measures have been announced around the world and we note where we expect them to buttress certain industries,” reads the report.

However at this point, the company calculates that markets which account for a combined 88 percent of global GDP, have some form of stay-at-home measures in place, so outside of the healthcare sector the company cannot pin-point exactly where, and most crucially when and how, these measures will have an impact on an industry-by-industry level.

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Follow the author on Twitter: @Lyaman_Zeyn

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