According to the expert, the economic consequences of the coronavirus pandemic will include reduced demand for oil, creating a surplus of 20 million barrels per day.
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Managing director of Japanese investment and securities banking firm Mizuho Securities, Paul Sankey, suggested that oil prices could “turn negative” because of the coronavirus pandemic, Fox Business reports.
West Texas Intermediate (WTI) crude fell more than 10% on Wednesday and reached near $ 24 per barrel, a level that was last seen in April 2002.
Sankey explains that one of the economic consequences of the coronavirus pandemic may be the demand reduction of oil, to the point of creating a surplus 20 million barrels per day.
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The “physical reality” of the market is that oil, once obtained, must be consumed or stored. When the storage cost It goes up enough, or space runs out, companies may even pay customers to take it away.
In his view, that situation where merchants would start paying customers will excess raw materials in the market and the oversaturation of storage facilities.
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