Oil Prices Below Zero In Historic Low

BusinessOil Prices Below Zero In Historic Low

Oil Prices Below Zero In Historic Low

COVID-19 crisis has been having a direct impact on the price of oil, reaching an 18-year low.
The United States is the hardest hit country. With a lockdown almost in place in all States, demand has decreased by 30% within the first weeks – so did the oil price. On 20 April, American WTI posted a negative price as its barrel went down to – $37.
However, forecasts have been optimistic as several European countries have announced they would end the lockdown and allow local businesses, schools and places of gathering to open again.

A dark year for black gold

2020 has been a dark year for black gold so far.
As Bloomberg explains, oil prices have not only plunged after the start of the global pandemic, but also because of “a breakdown in the original OPEC+ agreement. With no end in sight, and producers around the world continuing to pump, that’s causing a fire-sale among traders who don’t have access to storage.”, analyzed the financial media.
On 20 April, in an unprecedented turn of events, a WTI barrel was traded below zero dollar, reaching minus 37 dollars (-$37).
As a result, crude explorers cease the activity of 13% of their American fleet within a week on the last days of April.
British Petroleum announced it would slash its dividend for the first time since 1945.

Also, another consequence of this so-called 2020 “oil crash” futures are highly impacted – on 3 May, futures fell 8% in New York.

Is Q3 a likely rebound?

However across the pond, Europe looks as if it has the situation more under control.
With a few countries announcing the end of their lockdown (Germany, Italy and France), oil companies have found hope and a guarantee of a rebound in the transportation industry.
As a result, the Old Continent’s policy has been having a positive impact on prices this week.

Read on Alvexo: “Saudi Arabia Is Starting an Oil Price War”

On Wednesday, 29 April, a barrel of American WTI oil for June deliveries showed a promising 22% rise to $15.06. The price of a barrel of WTI oil was also up by 22% to $15.06. WTI price is expected to be higher this week. It soared to +35% on the same day.
Even if prices remain lower, a barrel of North Sea Brent for June deliveries also started to rise again with a 10% increase to $22.54 on Wednesday, 29 April.
However, experts are warning investors. According to Moody’s, “the pace of the market rebalancing and the rise in oil prices will depend on the demand,” said Elena Nadtotchi, Vice President and head of credit at Moody’s.

What could be the long-term consequences?

The 2020 oil crash could be devastating for the next few years, as projections of a “return to pre-COVID life” are so low.