JPMORGAN : Finally Stabilized, the struggling of oil market will take up to 3 months.
JPMorgan analysts mentioned the worst of the commodity-market carnage is over and global oil demand remains at historic lows as inventory vastly outpaces storage.
With the declaration of coronavirus pandemic and the ignition of a price war helped push oil futures for the first time below $0 on April 20.
The producers worked to curbs supply and lift prices and after weeks of emergency action, inventories are finally turning toward recovery,
“While there is still a massive glut of oil that will need to be cleared before there can be any meaningful recovery in prices, we believe that the global oil market is tentatively entering an inflection phase, where rebalancing has started,” the team led by Joyce Chang wrote Thursday.
Even if the oil market turns for the better, the coronavirus’ fallout will create lasting scars, JPMorgan said. Demand won’t reach pre-outbreak levels until November 2021, and the risk to own oil and gas assets “has likely been permanently elevated” due to greater uncertainty around supply and demand dynamics.
JPMorgan recommends defensive oil stocks for the near-term as months of market rebalancing is poised to fuel strong volatility. Natural gas has emerged as the bank’s “obvious winner,” while oil exploration and production businesses are “largely uninvestable” until oil prices match the cost of shale discovery.