Oil prices were lower by nearly 10% Monday morning and likely have more downside potential as we will "likely see negative demand" for the commodity this year, BP (NYSE: BP) CFO Brian Gilvary said on CNBC.
BP was modeling as early as February demand for oil to weaken by 300,000 to 500,000 barrels a day but still remain in positive territory. But instead of expecting a slower pace of growth, the oil giant is expecting demand for oil will contract -- a very rare event.
Oil prices are under pressure after Russia and Saudi Arabia entered into a de-facto trade war and rising coronavirus related concerns are keeping many people at home across the world.
Why It's Important
The global oil market is dealing with a "demand-side shock" along with a significant amount of new oil scheduled to enter the market within the coming weeks, the CFO said.
The company itself is operating from a "much stronger financial position" today compared to when Brent oil prices were at around $28 which is approximately $2 below the current price, he said.
What's next for the oil market depends in part on what the "new normal" will be for the world, he said. The company is currently modeling Brent to rebound to around $40 a barrel in 2021, a figure which was actually modeled four years ago.