As a result of the international pandemic of COVID-19, crude oil prices by the US benchmark WTI (West Texas Intermediate) crude hit the 22-year low $11 per barrel. The plunge in demand was about 40% on abundant supplies. The oil trade was also hit and suffered sharp losses as investors closed their positions before the expiry of the contract in May. Thus they would not be obliged to take the delivery of the oil.
As per the statement given by Bjornar Tonhaugen, analyst at Rystad Energy, “The real problem of the global supply-demand imbalance has started to really manifest itself in prices. As production continues relatively unscathed, storage is filling up by the day. The world is using less and less oil and producers now feel how this translates in prices.”
Meanwhile, by the European benchmark contract the oil prices at London Bernt North Sea oil were at $27.01 per barrel. The coronavirus peaks in Europe and the United States generally failed to lift the economic markets of Europe and Asia.
Instead, traders are worried about the oil storage facilities reaching their limits as the stockpiles continue to grow with a sharp fall in the demand due to the COVID-19 pandemic. The WTI was particularly hit strongly due to the filling up of storage facilities in Cushing and Oklahoma. The oil refineries were quite slow in processing the crude oil says Trifecta Consultants analyst Sukrit Vijayakar. With plenty of supplies from the Middle East, the WTI hardly had any buyers as the “freight costs are high”, said Mr. Vijayakar.
CURRENT SITUATION OF THE COVID-19
The governor of New York, one of the worst COVID-19 hit states in the world, Andrew Cuomo said that though the disease was “on the descent”, it was “no time to get cocky”. With lockdowns and physical distancing slowing the spread of the coronavirus, countries have intensified plans to loosen the restrictions on movement to prevent the economic backlash.
The Congress and the White House of Washington are working towards a $450 billion financial relief plan for the small businesses to support the economy.