Report
Patrick Artus

By how much should medium-term assumptions for oil prices be revised downwards?

We are interested in the medium-term outlook for oil prices (Brent). We begin with the following assumptions: Global GDP is likely to be 6% lower in 2020 than what was expected prior to the coronavirus crisis. This loss of GDP may be permanent, in the presence of factors weakening subsequent growth; The elasticity of global oil consumption to global GDP is 0.66; The price elasticity of oil demand is -0.07; Before the coronavirus crisis, a price of 56-58 dollars per barrel of oil (Brent) was expected in the medium term. All this leads to 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. But there could of course be a fall in supply: this figure of 25 dollars derives purely from demand-side effects.
Provider
Natixis
Natixis

Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.

 

Analysts
Patrick Artus

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