This Monday, the oil price is in free fall, at least as far as the American reference variety West Texas Intermediate (WTI) is concerned: a barrel (159 liters) at the London stock exchange in the afternoon only temporarily cost around 11 dollars – that’s around 40 percent less than on Friday. A barrel of the North Sea Brent bred temporarily cheaper by almost eight percent to around $ 26 a barrel.
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The rapid drop in prices of the past few weeks continued dramatically at the beginning of this week. Due to the corona crisis, global demand has declined sharply, making the raw material cheaper. In addition, important oil-producing countries, especially Saudi Arabia and Russia, were unable to agree on a reduction in their production for a long time. The agreement was reached last weekend, even under pressure from US President Donald Trump, but it won’t come into force until May. So much more oil is still being extracted than consumed.
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In addition, the deal brokered by Trump does not seem to be enough. This stipulates that the 23 countries belonging to the so-called Opec +, together with US producers, want to produce a little less than ten million barrels a day. But the International Energy Agency predicts that 29 million barrels a day will be needed in April alone. The excess oil has to be stored somewhere. But at the central trading center for WTI in Cushing in the US state of Oklahoma, the space will soon be exhausted. (Read a detailed analysis here.)
The oil price will only rise sustainably once the economic corona crisis has bottomed out and significantly more oil is used again.
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