By Nakul Iyer
(Reuters) - Oil prices will stay below $40 a barrel this year, as measures aimed at halting the rapid global spread of the coronavirus cripple demand and the collapse of an OPEC+ deal adds to a mounting supply glut, a Reuters poll showed on Tuesday.
The survey of 40 analysts forecast Brent crude prices (LCOc1) would average $38.76 a barrel in 2020, 36% lower than the $60.63 forecast in a survey in February.
The 2020 outlook for West Texas Intermediate crude (CLc1) was slashed to $35.29 a barrel from last month's forecast for $55.75.
Both Brent and WTI crude prices are now trading in the low $20s. Global benchmark Brent slumped nearly 70% from January highs as global virus-led lockdowns hammered demand and a Saudi-Russian price war flooded the market.
"The floor has dropped out of the oil market, and we do not expect it to return until the fourth quarter," Economist Intelligence Unit analyst Cailin Birch said.
Oil prices, which had already been weak, took a steeper dive in March when a deal on supply curbs between the Organization of the Petroleum Exporting Countries, Russia and other producers, a group known as OPEC+, fell apart.
GRAPHIC: Coronavirus crushes oil demand, prices - https://fingfx.thomsonreuters.com/gfx/editorcharts/jxlbpgywpqd/eikon.png
Analysts expect global demand to contract by between 0.7 million and 5.0 million barrels per day (bpd) in 2020, potentially eclipsing the fall in 2009 during the financial crisis.
"Mobility restrictions to help contain the spread of the virus are largely to blame for the plunge in demand," UBS analyst Giovanni Staunovo said, adding that flight restrictions in Europe and the U.S. were major blows to jet fuel demand and "tapering" traffic would hit diesel and gasoline consumption.
The slump in gasoline and jet fuel demand has crippled refining margins across Asia, Europe and the United States causing refiners worldwide to slow output.
GRAPHIC: Gasoline refinery margins collapse - https://fingfx.thomsonreuters.com/gfx/editorcharts/jxlbpgywpqd/eikon.png
"We will see a new round of negotiations between Saudi Arabia and Russia in the future. There is no alternative to supply cuts by OPEC+ in this situation," said LBBW analyst Frank Schallenberger.
Saudi Arabia has struggled to sell additional crude to refiners due to surging freight rates amid low demand.
But Edward Moya, a senior market analyst at broker OANDA, said "a revival of production cuts by OPEC+ seems very unlikely. OPEC will take a wait-and-see approach and hope the second half of the year will see a strong rebound in demand."
U.S. production could fall by 0.5 million to 3 million bpd this year, the poll showed.
"U.S. supply will drop sharply as weaker shale players will drop out. They don't seem to be properly hedged for prices this low," said David Ölzant, an analyst at Raiffeisen.
Plummeting prices have left only a handful of producers who can turn a profit from their newest wells, Reuters analysis of data provided by consultancy Rystad Energy showed.