Barclays cuts 2020 crude forecasts by $12 on virus and OPEC+ deal collapse

Oil prices fell more then 20 percent after the breakdown of the OPEC+ agreement. (AFP)
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Updated 25 March 2020

Barclays cuts 2020 crude forecasts by $12 on virus and OPEC+ deal collapse

  • Oil prices rose on Tuesday on hopes that the United States will reach a deal soon on a $2 trillion virus aid package which could blunt the economic impact of the outbreak and in turn support oil demand

LONDON: Barclays on Tuesday slashed its oil price forecasts for 2020, citing considerable downward pressure on the market from the Saudi-Russian price war and demand disruption because of the coronavirus.
The bank lowered its 2020 price outlook for Brent and West Texas Intermediate by $12 each to $31 and $28 per barrel respectively.
“Prices are likely to remain under pressure until the virus situation turns the corner, and if we continue on the projected market balances path, even Saudi Arabia and Russia will not be immune from the price fallout,” analysts at the bank wrote in a note.
It joined several other banks in slashing their oil price forecasts on account of the collapse of an output curb deal among members of the Organization of the Petroleum Exporting Countries and allies, or OPEC+, as well as the demand hit from the virus.
Barclays also forecast global available onshore storage capacity at about 1.5 billion barrels with an estimated oversupply of over 5 million barrels per day (bpd) for this year and an oversupply of 10 million bpd on average for second quarter.

Meanwhile, “strategic petroleum reserve (SPR) purchases by the US government are unlikely to alleviate US producers’ pain,” the bank said.
The available SPR storage is less than 80 million barrels, according to Department of Energy data, and would amount to a flow of less than 0.5 million bpd when filled over a period of six months, compared with almost 10 million barrels of projected oversupply over the second quarter, it added.
Oil prices rose on Tuesday on hopes that the United States will reach a deal soon on a $2 trillion virus aid package which could blunt the economic impact of the outbreak and in turn support oil demand.
Prices slumped over 20 percent after the breakdown of the OPEC+ agreement threatened to flood the market with oil.


Finance shake-up with Saudi derivatives market to launch in Q3

Updated 36 min 9 sec ago

Finance shake-up with Saudi derivatives market to launch in Q3

  • Launch of futures contracts to be made before the end of the third quarter of this year

RIYADH: Saudi Arabia’s Capital Market Authority (CMA) plans to launch a derivatives exchange in the latest move to modernize the Kingdom’s financial landscape.

An announcement about the launch of futures contracts will be made before the end of the third quarter of this year, Asharq Al-Awsat newspaper reported, citing CMA Chairman Mohammed El-Kuwaiz.

“We are in the phase of developing the derivatives market with intensive work on the options contracts and the futures contracts” he said.

He was speaking in an online discussion panel organized by the General Authority for Small and Medium Enterprises (Monshaat).

The markets chief said that the impact of the coronavirus on the market would be more visible in second quarter earnings and that the regulator was working on easing some of its procedures in response.

Tadawul is planning to launch additional derivative products gradually as part of its strategy to diversify its product offering and provide more investment opportunities for global investors.

Separately, Tadawul CEO Khalid Al-Hussan disclosed that the bourse has received a number of requests for new share offerings that are currently being reviewed. He said three companies had been approved to list on the parallel market known as “Nomu.”

 

 

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Derivative

A derivative is a financial instrument that acts as contract between two or more parties whose value is based on an agreed-upon underlying asset such as a stock or a bond.