FLUCTUATION

xx!
OF WTI OIL
PRICE
IN MARCH & APRIL,
2020
Group 5
Group members:
Member ID

Đào Thị Diệu Linh 16041143

Hoàng Thanh Hà 16042725

Phạm Đức Hạnh 16030113

Lê Ngọc Phương Linh 16041698

01THEORY
02
DEFINITI
03 04
CAUSE –
DEMAND
ANALY
REVIEW ON &SUPPLY
SIS
FACTORS

05 06
SOLUTIO
07
PREDICT
08
IMPACTS LESSONS
NS ION

TABLE OF
1. THEORY
REVIEW
Let’s play a game!
GAME CODE: 0110000
02. What
is WTI ?
2.1. Definition
West Texas Intermediate

A light, sweet crude oil that serves as one

of the main global oil benchmarks in oil
pricing, along with Brent and Dubai Crude.

Sourced primarily from inland Texas and

is one of the highest quality oils in the
world, which is easy to refine.
Trading WTI is an efficient way to trade on both U.S and international
trading events relating to crude oil.
2.2. Oil Prices Collapse in 2020

● 2020 saw the collapse of crude oil prices.

● Oil prices fell more than 90%
● On April 20, the May contract for WTI
futures fell below zero for the first time,
the day before the contract expired.
 WTI CRUDE OIL
PRICE
IN MARCH & APRIL
2020
03. The fluctuation of crude oil price in March & April 2020

By April 2020, the price of Movement of

Movement of WTI
WTI price from January 2019 to
April 2020.
WTI dropped by 80%, down crash started in
The crash in mid-February 2020.
to a low of about $5, due to
the COVID-19 pandemic and
the 2020 Russia–Saudi Arabia
oil price war.
For the first time in history,
the price of US oil has
“turned negative”.
03. The fluctuation of crude oil price in March & April 2020

On April 20th, the WTI

crude oil price delivered in
May fell to -$37.63 each
barrel.
Demand for oil has all but
dried up as lockdowns
across the world have kept
people inside.

Oil firms have resorted to renting tankers to store the surplus

supply and that has forced the price of US oil into negative
territory.
03. The fluctuation of crude oil price in March & April 2020

However, since May 2020

up to February 2021, oil
prices tend to increase
steadily.

Although a drop in oil prices in the US is unlikely to happen

again in 2021, the implementation of the pandemic blockade
measures by the government will still limit the demand in 2021.
04. THE CAUSE OF WTI
OIL PRICE
FLUCTUATION
 DEMAND & SUPPLY FACTORS

DEMAND SUPPLY
FACTORS FACTORS
Covid-19 lockdown order The oil price war
Lack of storage facilities in the
U.S.

Oil price determined by future contracts

 HI S
TOR
OI L YO
F
DEM In the 70s of 20th century: a decline in oil
A
U.S. NDED
demand due to the growth in advanced
technologies -> petroleum gases and atomic
IN power replace crude oil in economic activities.
The U.S. became a member of an exporting
country thanks to shale oil -> holding the
petroleum market share together with OPEC
countries & Russia.
 DEMAND FACTORS
19/3: first statewide stay-at-home order was
imposed.
-> Stagnating sectors of the economy.
-> Leading to an unprecedented drop in oil
market demand.
The crude oil prices have fallen by since the beginning of 2020 and continue
to plunge

—SOMEONE FAMOUS
 SUPPLY FACTORS

The oil price

wars between U.S. runs out of
Arab Saudi & oil storage
Russia facilities

1 2
 OIL PRICE WARS BETWEEN
SAUDI ARABIA & RUSSIA

SAUDI RUSSIA
ARABIA
Want to cut output to Oppose the request from
stabilize the oil price Saudi Arabia to cut
floor
Be able to afford low oil prices, output.
much of its budget depends on oil. -> Russia is determined not
-> According to the estimates of the to lose its market share to
IMF, SA needs a higher price, about the U.S.
80$/barrel, to balance its budget.
Saudi Arabia responded by offering
discounts on oil and announcing that
it would increase production
-> Leading both WTI and Brent to
their lowest prices -> caused a sell-off
in global markets

U.S. has been affected by the oil price

war since its oil production cost is
higher than SA & Russia.

(SA ~ 10$/barrel, Russia ~ 20-30 $/

barrel, U.S. < 50 $/barrel)

-> The low oil price caused many U.S firms to declare its delay in
operation/ bankrupt
 U.S. RUNS OUT OF OIL STORAGE
FACILITIES

Lack of facilities to store oil -> Storage facilities in the US will run out of capacity, with
stockpiles at Cushing, the main delivery point in the US for oil

WHY IT HAPPENED?
Demand for oil has dried up as lockdowns keeping people inside -> As a result, oil firms have
resorted to renting tankers to store the surplus supply and that has forced the price of US oil
into negative territory..
A historic drop occurred on April 2
0, when the price of West Texas Int
ermediate crude dropped by almost
300%, trading at around negative $
37 per barrel
05. IMPACTS OF
THE OIL CRISIS
2020
 NEGATIVE IMPACTS

Economy Labor Market Oil-storage facilities

Negative impacts on economy

Shale industry: rig owners, well services providers,

drilling tool manufacturers, and oil country tubular
goods manufacturers

Multinational groups to local operators:

• More than 28 North American O&G

producers announced capital spending cuts of
30%, or US$12 billion, for 2020.

• Hundreds of small firms could go bankrupt

even with prices at $20 per barrel
Labor Market

Before oil crisis (in 2019)

The oil and gas industry employed nearly
470,000 people across extraction, drilling
and support activities
In March, 2020
The oil and gas industry lost 51,000 drilling
and refining jobs
After oil crisis
The pandemic made 107,000 oil and gas
jobs disappear. Most aren't coming back
anytime soon
 OIL-STORAGE FACILITIES

Oil-storage facilities in the US

have filled-up quickly

 In April ,the total oil storage

capacity is 80 million barrels

 After one month, Cushing has

only 20 million barrels of free
storage left, which is fully booked
and likely to be completely utilized
in the end of May.
Cushing (Oklahoma)
POSITIVE IMPACT

— Lower oil prices is lower inflation

—

A lower inflation rate is good for the consumers.

 06. SOLUTIONS
Cut production by a record amount Buy oil for the country's national reserve
A deal with OPEC to prop up prices,
OPEC members and its allies
committed to buying oil for the Strategic
finally agreed with a record deal to
Petroleum Reserve.
slash global output by about 10%
=>>Storage facilities in the US will run
=>> the OPEC deal will not be
out of capacity, on land and at sea.
enough to balance oil markets

Make funds available for important companies.

A plan which will make funds available for important big shale oil and gas
companies
=>>U.S. oil futures prices turned negative on April 20 for the first time ever,
many big shale oil and gas producers are protected from low prices by
hedges in 2020 and many refinanced debt in recent years to put off debt
 07. PREDICTIONS
Oil Prices Won't Be Negative Forever. But the Oil Industry Will Never
Be the Same
1
Vaccination is not a panacea, social distancing,
testing and isolating cases will remain for some time

2 The Great Depression

The International Monetary Fund expects the world’s economy to
contract by 3%this year, due to what it calls the “Great Lockdown”

3
Some pandemic-era lifestyle changes might stick

4
The longer the COVID-19 pandemic lasts, the greater the damage oil producers will
endure.
 100 million barrels a day.
The “golden era” in 2019 when the US became the Number 1 oil producer in the
world.
 08. Lessons after the oil crisis

2020 may well be remembered as the worst year in the history of global oil markets
when it broke. =>> Black April

Oil market stability is essential to the economic growth of the world

in the future

But it requires cooperation for supply and demand

balance, rather than price wars, tensions or the politics
of finger-pointing and blaming each other
 THANKS!
Does anyone have any
questions?

CREDITS: This presentation template was created by Slidesgo, including icons by Flaticon, and infographics & images by Freepik.
Please keep this slide for attribution.