OIL MARKET AFFECTED BY GLOBAL PANDEMIC:
As the global pandemic is affecting people all over the world, it is also adversely affecting the economy of world. Everything is jammed as world is stopped by the disease as it affects the daily lives of people it also badly affected the oil exporting worlds. Russia , Saudi Arabia are the top producers of oil and for three years they had a deal under which both countries will limit their oil production in order to raise the prices for the prices will surely raise when the oil production is limited and more in demand .
But due to recent pandemic the demand of Oil across the world is dried up. China as the biggest importer of Oil also refused to buy any oil for it was affected the most by COVID-19. The demand of oil is evaporated because the global stock markets are falling and the use of oil in jets as well as airplanes is limited as all the flights are cancelled to stop the spread of deadly disease.
PRICES FELL TO NEGATIVE FOR THE FIRST TIME:
For the first time the price of West Texas, the benchmark for US oil fell as low as -$37.63 a barrel. The contract suggests that traders are willing to pay to have oil taken of their hands or perhaps taken for free or without any cost. The US energy Information Administration reported last week a record 19.3 million barrel crude stock build while there is currently 21 million barrel remaining storage available at the clashing hub in Cushing. The oil prices fell into negative territory for the first time in history.
It all goes back to the Saudi-Moscow conflict when Saudi Arabia analyzing the Global situation wanted to cut the production of oil to keep the prices stable. The Russians showing inflexibility, disagreed by saying that they wanted to produce more. This led to the price war between both states. It became worse when Moscow messaged Saudi Arabia that Saudi is going to face a lot more trouble by this loss than Russia as Saudi’s economy is primarily dependent on oil Export. Hence both states kept the verbal attacking leading to price war. Both Saudi and Russia flooded the market with oil supply with falling prices due to less or almost no demands.
US STEPS IN THE PRICE WAR:
The oil industry has been continuously struggling with the conflict between their producers. US president Donald Trump took some action after US shale oil Producers were at risk of going bankrupt as the oil prices fell to negative. Donald trump appealed to the crown Prince of Saudi Arabia Muhammad Bin Salman and Russian President Vladimir Putin to set aside their conflicts and focus on building up as well as stabilizing their oil markets.
RECORD BREAKING CUT OUT IN OIL PRODUCTION:
The price war between Russia and OPEC finally resolved after a A joint agreement was made by OPEC led by Saudi and Russia on April 12 and Oil output was cut by 9.7 Million barrels per day. The agreement was made after a long negotiation and discussion between the states.
But the analyst say that even that amount of Oil cut is not enough to stabilize the markets going through huge loss. “Market prices are showing that Oil is all but worthless now” ;says Jim krane (Aljazeera)
The analysts predicted further oil cut in future as the storage problems remains on the top. The problem is not about how to use the oil but to where store it as the storage on land and sea is now full. US president Trump says that nation will preserve the oil for future use and buy oil for national reserve but also concerns about the US storage and capacity to save the oil.
If the outbreak of COVID gets severe or on peak the consumption of oil by many countries such as China , Iran , South Korea ,Italy may be lessened and stopped causing the oil industries and producers to face a huge loss by the month of May.