Sun.

May 31st, 2020 12:06:00 PM    

LegisNations
Greater Knowledge. Human
Wisdom

 HOME EVENTS  ABOUT US CONTACT US

SUBSCRIBE TO GET
BUSINESS & ECONOMY
UPDATES

REALISTIC NEGATIVE OIL PRICES Name*

By Kumar Rishabh Parth

 APR 22, 2020  Business & Economy, Canada, Corona-virus pandemic, Crude Oil, Fossil
Fuels, Oil Crisis, US
Email*

Subscribe
INTRODUCTION
Oil is one of the most valued commodities of the world, their dominance has been overturned by this
pandemic’s lockdown. The worth of Oil barrel of the United States fell to nothing and for the first time in
history has turned negative. The demand for oil diminished due to coronavirus lockdown in the world as
it has kept people in their houses. This resulted in oil firms renting tankers to stockpile a surplus supply
of the oil in the market, whose consequence is the adverse price of oil in the United States. The price of
a barrel of West Texas Intermediate[1] (WTI), the benchmark for US oil, fell as low as minus $37.63 a
barrel and the crude oil producers were willing to pay someone to take the product off their hands. This
distress of where to keep the oil has led to a severe drop for WTI. Oil is generally traded on futures
contracts and prices for crude to be delivered in June are now at its all-time low at $20. The international
benchmark for Brent crude oil also went to its lowest in 18 years- down 8.9% at less than $26 a barrel.
“This is off-the-charts wacky,” said Stewart Glickman, an energy equity analyst at CFRA Research.[2]
“The demand shock was so massive that it had overwhelmed anything that people could have
expected.”

OGUK, the business lobby for the UK’s offshore oil and gas sector stated that the negative price of US
oil would hamper the firms operating in the North Sea. There is a tug of war going between both
tumbling demand and infighting among producers about reducing output. Initially, this month OPEC and
its allies agreed upon an agreement to slash the output by about 10%. Thus, resulting in the deal which
has caused the most massive cut in oil production ever made.

According to the belief of many analysts, the cuts were not too big to make a difference.

“It has not taken long for the market to recognize that the Opec+ deal will not, in its present form, be
enough to balance oil markets,” said Stephen Innes, chief global market strategist at AxiCorp

WHAT NEGATIVE OIL PRICES MEAN AND

HOW THE IMPACT COULD LAST?
The inexplicable thing that happened in the market does not mean one can make money storing the oil,
or that gasoline will cost nothing. The price of crude oil is accounted for only about a third of the price of
gasoline and diesel at the pump. Refining, distribution cost, and taxes account for much of the price, and
why negative oil prices will not mean free gasoline.

The negative price concerns only the contracts for the delivery of barrels in May that are traded on the
so-called futures markets. As a result, traders, this week are trying to get rid of the product rather than
figuring out how to store it. The May contracts that fell so much ended on 21st Apr’ 2020 and the price of
June contract is still in positive territory, though even their prices have fallen in recent weeks.

WILL THE PRICE OF OIL STAY OR BECOME

NEGATIVE AGAIN?
Experts do not suppose that the prices of the oil will remain negative for weeks and months. Demand for
oil is likely to be tepid for months because few connoisseurs believe that the economy will quickly
rebound to where it was before the pandemic[3].

This problem of negative oil prices will put pressure on countries like Saudi Arabia and Russia, huge
producers to pump less oil because they will run out of room to store it.[4]

This will further help in lifting prices or by slowing down the declines.

Observing Monday’s abnormal fall in crisis was an aide-mémoire that the world economy has changed a
lot since the last oil crisis.

BIBLIOGRAPHY
https://www.bbc.com/news/business-52350082
https://www.bloomberg.com/news/articles/2020-03-19/the-idea-of-negative-oil-prices-is-more-
realistic-than-you-think
https://www.aljazeera.com/programmes/insidestory/2020/04/oil-prices-hit-negative-territory-
200421190204281.html
 [1] Ward, Sandra. “Commodities On The Rebound.” Global Finance, vol. 31, no. 4, Global Finance
Media Inc., Apr. 2017, p. 10.

[2] “US Oil Prices Drop to 21-Year Low as Demand dries up.” BBC News, BBC, 20 Apr. 2020,
www.bbc.com/news/business-52350082.

[3] Bajaj, Vikas. “What Negative Oil Prices Mean and How the Impact Could Last.” The New York Times,
The New York Times, 21 Apr. 2020, www.nytimes.com/article/negative-oil-prices-facts-history.html.

[4] Ibid

By Kumar Rishabh Parth

RELATED POST

Leave a Reply
Your email address will not be published. Required fields are marked *
Comment

Name *

Email *

Website

Save my name, email, and website in this browser for the next time I comment.
 Post Comment

YOU MISSED

POLITICAL UNCATEGORIZED LEGAL

LEGAL SOCIAL

CRY OF THE DILEMMA OF THE

LAWS AGAINST
HUMANITY IN REALITY: THE ‘ESSENTIALLY
COVID-19: IOTA
 MAY 25, 2020  CHETNA  MAY 20, 2020  ARUSH  MAY 12, 2020  KUMAR
 MAY 29, 2020  SHIKHA
ALAGH AND ARUSH AGARWAL AGARWAL RISHABH PARTH
SUMAN

   

LegisNations
Greater Knowledge. Human Wisdom

Proudly powered by WordPress | Theme: Newsup by Themeansar. Home ABOUT US CONTACT US EVENTS

Legisnations 1st Article Writing Competition Movie review writing About Us Contact

Privacy Policy Terms Of Use

 Privacy Policy Terms Of Use About Us Contact

PDFmyURL.com - convert URLs, web pages or even full websites to PDF online. Easy API for developers!