Oil Price Rout Shakes Outlook

(Global) Major Projects Impacted

Oil prices have continued to plummet this week, as commentators suggest the price of crude could plunge below US$20 per barrel.
The gloomy outlook comes in advance of a predicted ramp-up in production from Russian and Saudi Arabia on April 1, when the current OPEC+ agreement ends. With markets reeling from the coronavirus outbreak a further drop in oil prices is likely to make an increasing number of projects unviable.

“The last time that there was a global surplus of this magnitude was never," Jim Burkhard, vice president at IHS Markit, told Bloomberg. "Prior to this the largest six-month global surplus this century was 360 million barrels. What is coming will be twice that or more,”

Oil Price to Low Teens
Saudi Aramco’s Chief Financial Officer reiterated the firm’s commitment to increase production confirming the company can "sustain a low breakeven oil price."

“Oil could easily be in the teens at the bottom. Could even be low teens at the lowest. The main driver is for, a week or two, we could have global market oversupply of over 10 million barrels per day," said Abhi Rajendran, director of research at Energy Intelligence.

Breakbulk Demand

The impact on breakbulk demand is likely to be severe for operators serving projects with high breakeven as oil majors scramble to cover costs and meet obligations from a dwindling revenue stream.

As China is reported to be past the peak of new daily cases breakbulk exports are expected to recover, but sustained falling oil prices potentially pose a greater risk to the heavy-lift sector as demand-side activity slows to a halt.

Many in the sector predict a long tail response as project pipeline, which had shown signs of improving, is now predicted to flatten as the global economy enters recession. Analysis of the 2008-09 recession suggests multipurpose and heavy-lift demand levels did not recover until 2010 or 2011.