Oil: Medium-term Brent price of around 25 dollars per barrel – Natixis
|Strategists at Natixis maintain the hypothesis of an oil price of around 25 dollars per barrel in the medium-term, in the absence of a persistent and coordinated reduction in oil production.
Key quotes
“We believe that the fall in the level of GDP in 2020 (6%) will be permanent. [...] We then estimate the elasticity of global oil demand to global GDP: it is 0.66.”
“We have to estimate the price elasticity of global oil demand which is commonly estimated to be 0.07.”
“The crisis will permanently reduce global oil demand by 4%. This will reduce the equilibrium oil price in the medium term by 56% leading to a medium-term Brent price of around 24-26 dollars per barrel.”
“If oil prices return to only 25 dollars per barrel after the crisis, the main consequence will be a very sharp fall in production of expensive oil: Canada, US shale oil, very deep offshore. This would lead to a trend towards lower-production-cost oil, which would make economic sense.”
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