Image source
Getty Images
There is an unprecedented decline in oil demand due to the Corona pandemic crisis
US oil prices have fallen below zero for the first time in history, which means that oil companies pay customers to get their products for fear of accumulating their crude stocks during the next month.
The demand for oil and its derivatives decreased during the past months due to the closing procedures in various countries of the world following the outbreak of the Corona pandemic, people were forced to stay in their homes, and work stopped in many factories.
The oil companies had to hire huge oil tankers to store the surplus crude, so the companies became paying buyers to move the crude away from their facilities in order to avoid paying more money to store it.
In the United States, the price of a barrel of oil reached $ 37.63.
Stuart Glickman, oil expert at CFR EO Research Center, said the shock of falling demand is so great that it exceeds all previous expectations.
For contracts for the delivery of next June, the price of a barrel reached only $ 20. The benchmark Brent crude fell in the same period by nearly 9 percent to reach 26 dollars.
Glickman said that the historic decline in oil prices reminds everyone of the obstacles faced by international oil companies, warning of the possibility of a decline in the contracts for the month of June also if the economic closure continues in most parts of the world.
World oil prices have been affected during the past months by two main factors: declining global demand and the clear and declared conflict between the Organization of Petroleum Exporting Countries “OPEC” and Russia because of the differences on the volume of daily production.
Early this month, OPEC members and their allies finally agreed on a historic deal to cut the daily product by about 10 percent, which is the largest reduction of its kind, yet experts believe it is not enough to change the status quo.
Analysis: Andrew Walker
BBC Economic Reporter
The recent agreement between OPEC and Russia will lead to a decrease in supply, just as the major oil companies in the world and in the United States decided to reduce daily production as well.
Nevertheless, there will not be much difference, as the world already has a lot of crude and it is a surplus that is greater than what can be consumed, and the matter does not depend only on the world’s inability to consume this amount of crude, but the biggest crisis is that we cannot store it until the current economic restrictions are eased.
–
