Welcome to Thoughts on the Market. I'm Andrew Sheets, Chief Cross Asset

Strategist for Morgan Stanley. Along with my colleagues bring you a variety of

perspectives, I'll be talking about trends across the global investment

landscape and how we put those ideas together.

It's Friday, April 17th at 2 p.m. in London.

The biggest question for markets remains how do you safely reopen the economy and for our thoughts on this please see the

recent two-part conversation between myself and my colleague Matthew Harrison our

biotechnology analyst at Morgan Stanley but away from virus, the most volatility is being seen in

commodities, specifically oil. We think dynamics in the oil market argue for low prices

today, but a return to higher prices, even a doubling of prices by next year.

Let's start with what happened. Since the start of the year, the price of a barrel of oil in the U.S.

has fallen about 70 percent to less than $20 a barrel.

And prices have continued to fall this week,

even as equity and credit markets have now managed

a healthy rebound from their lows in late March.

This steep continuing decline in oil prices is really a fascinating story of demand, supply, and even a little bit of game theory.

The story starts with demand.

Oil consumption has fallen sharply as the coronavirus pandemic has caused people to drive

less, fly less, and generally do less of everything that consumes oil. Our energy

analysts at Morgan Stanley estimate that the current recession could cause oil consumption

to fall by about 15 to 20 million barrels a day or about 15 to 20 percent of

demand a drop several times larger than what we saw during the financial crisis.

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