As trade opened on Monday with most countries extending their nations lockdown over the weekend, crude oil prices fell. U.S oil futures (WTI – Western Texas Intermediate crude oil) is trading at $14.24/barrel. The price is down by $4.03 a 22.06% decline after hitting a low price of $14.19 at one point. The lowest not seen in over a decade. Canadian oil futures( Western Canadian Select – WCS) has lost $4.03 and is trading at $1.99/barrel which represents a 66.94% decline in price. WCS traded as low as $1.94. Oil future bench mark brent crude is trading at $26.97/barrel, a 3.95% decline. Brent at one point traded as low as $26.91/barrel. Investogist had earlier reported on 18th April 2020 about the unprecedented low price at which Nigeria’s bonny light crude was trading.
The demand for oil has been drastically reduced as the world battles the Coronavirus (Covid-19) Pandemic. There is 2,404,555 confirmed cases of Covid-19 worldwide resulting in 165,257 deaths according to John Hopkins University Coronavirus resourse center. With dwindling oil storage capacity, ships are being loaded with oil. There is an estimated 160million barrels of oil on ships. There has been low demand of oil especially from refineries, due to the restriction in movement thus a low demand for fuel. In the latest report released by OPEC, it lowered its oil demand forecast for 2020.
In a bid to stem the fall in oil prices, OPEC+ reached a record deal to cut production by 9.7 million barrels per day brokered by The U.S President, Donald Trump. G20 oil producers also joined the production cut agreement. According to Saudi Arabia, about 20 million barrels of oil was being removed from global daily production.
As movement and most industrial activities around the world remain restricted, we do not foresee a short term increase in the demand for oil. According to OPEC in its Monthly Oil Market Report released on 16th April, 2020 – “For 2020, the world oil demand growth forecast is revised lower by 6.9 mb/d, to a historical drop of around 6.8 mb/d. The contraction in the 2Q of this year is expected to be around 12 mb/d, with April witnessing the worst contraction at about 20 mb/d. The impact of the COVID-19 outbreak in China in 1Q20, and its negative impact on transportation and industrial fuels in the country, has since spread globally and is now affecting oil demand growth in most other countries and regions, with an unprecedented impact on global oil demand, transportation fuels in particular. As a result, OECD oil demand is revised lower by 3.7 mb/dto decline by 4.0 mb/d, while non-OECD oil demand growth is adjusted lower by 3.2 mb/d to contract by 2.9 mb/d for the year. Considering latest developments, and the large uncertainties going forward, downward risks remain significant, suggesting possibility of further adjustments, especially in the 2Q, should new data and further developments warrant revisions”.
Written by:
Ifunanya Ikueze
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