Following revisions to its January forecasts, Rystad said that brent crude oil prices, earlier expected to average nearly $60 per barrel in 2020, are now forecast to slump to about $56 per barrel for the year.

Another negative revision might be around the corner due to the increasing downside risk.

Brent has come under renewed downwards pressure this week, trading below $55 per barrel as news of rising numbers of coronavirus cases across the world have spooked market participants.

Rystad Energy’s latest crude oil market balances suggest that the epidemic’s net impact on oil demand could create almost the same amount of surplus crude barrels during the second quarter of 2020 as it will in first quarter of the year.

The surplus may amount to nearly 1.8 million barrels per day without any additional production cuts in the market, assuming Libya’s production returns to normal during the second quarter.

Rystad Energy therefore sees additional downside risk to crude prices from today’s $55 levels during the second quarter, unless at least 1 million barrels per day are removed from the quarter’s market balances.

Meanwhile, gas prices in Europe for 2020 are now forecast to fall more than previously expected, to $3.95 per million British thermal units (MMBtu) on average, while Asian Spot prices has been revised down to $4.63 per MMBtu for 2020.

The low gas prices are a result both of the coronavirus-affected demand and of an oversupply of LNG this year.

However, the low prices represent a major economic incentive to switch from coal-to-power generation to gas-fired electricity production.

In Europe and in Asia, gas prices are at record low levels – significantly strengthening the economic argument for switching from coal to gas.

Rystad Energy expects gas-for-power demand in Northwest Europe to increase around 6% this year from 2019.

There are limitations, though, says Carlos Torres-Diaz, Rystad Energy’s Head of Gas and Power Markets:

Europe is reaching a limit on how large additional gas volumes it can take, as Russian volumes remain high, storages are full, and temperatures stay mild. Asian buyers should take advantage of the price slump to import higher volumes of a cheaper and less carbon-intensive fuel than coal.