Goldman sees oil tumbling another 32% by July as coronavirus hits demand

• Goldman Sachs on Tuesday lowered its second quarter 2020 outlook for Brent crude to $20 per barrel from $30, a 32% decline from where it traded midday.
• It's the second time the firm has slashed its forecast in two weeks amid the coronavirus pandemic and a global oil price war that's unfolded between OPEC and its allies.
• "COVID-19 is driving second-order effects in both commodity and equity markets that are creating outcomes which far exceeded our negative views from last month," wrote Goldman Sachs analyst Jeffrey Currie in a Tuesday note.
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Oil has been hit hard as the coronavirus pandemic has weighed on demand, and sparked a global price war between OPEC and its allies that threatens to boost supply to a record. Goldman Sachs thinks it could fall even further as soon as the second quarter.

On Tuesday, Goldman lowered its second quarter 2020 outlook for the international benchmark, Brent crude, to $20 per barrel from $30, a 32% decline from where it traded midday at $29.40 per barrel. It's the second time the firm has slashed its forecast in two weeks.

The lowered estimate comes amid the coronavirus pandemic, as the number of cases of COVID-19, the illness caused by the virus, increases.

"COVID-19 is driving second-order effects in both commodity and equity markets that are creating outcomes which far exceeded our negative views from last month," wrote Goldman Sachs analyst Jeffrey Currie in a Tuesday note.

Demand losses across commodities are now "unprecedented," Currie said. Oil use is down as much as 8 million barrels per day amid the coronavirus outbreak, which has greatly slowed global travel and other activities, according to the firm.

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In addition, the oil market will soon have to contend with what could be a record surplus. Saudi Arabia and OPEC ally Russia are both preparing to boost demand on April 1, the day that previous cuts from the organization are set to expire.

"The implications of lower oil prices is far reaching, driving down the input costs of agriculture and many other goods while quarantines will further hit restaurant and cafe demand for livestock and softs," Currie wrote.

Going forward, Currie expects that both equity and commodity prices will rebound once the contagion stabilizes. Equities will revert back to normal faster, however, as they're forward looking whereas commodity markets "are spot assets and must clear the surpluses developing today from weak demand and rising supply."

And, there is at least one silver lining to the shake-up the current shock is spurring in oil, Currie said.

"The industry is likely to emerge in a much more healthy position with many of the zombie companies that were a dead weight on returns removed, even paving the way for an attractive international offering of Saudi Aramco," he wrote.

Get the latest Oil WTI price here.