New York, United States (CNN Business) – It seems that the success of US President Donald Trump in convincing Russia and Saudi Arabia to reduce oil production is premature.
US oil prices fell 8% again on Friday, ending at an 18-year low of $ 18.27 a barrel.
At one point, the price of crude oil fell to $ 17.33 a barrel – the weakest price since November 2001.
The accelerated meltdown in the oil market reflects the realization that OPEC + production cuts are not nearly enough to offset the epic collapse in demand caused by the Corona virus crisis.
The price of crude oil rose to $ 28.34 a barrel on April 3, after Trump indicated that Saudi Arabia and Russia would make massive cuts in production.
After OPEC + finally agreed to these cuts at the end of last week, Trump thanked Russian President Vladimir Putin and Saudi King Salman bin Abdulaziz for settling the recent price war between them.
“This will save hundreds of thousands of energy jobs in the United States,” Trump said on Twitter on Sunday.
However, Crude Oil has renewed sales in recent days, and it is currently down 36% in the two weeks since the April 3 peak.
Since hitting $ 63.27 a barrel in early January, US crude has lost 71% of its amazing value.
While Friday’s sales were a bit strange. And while US oil prices fell, Brent crude – the global benchmark – rose modestly.
Despite the decline in April contracts for US oil, May contracts held up well. April contracts expire early next week.
Analysts said that this wide gap between the contracts could continue throughout the year, because the world will quickly depend on the traditional storage area of oil. This would force oil companies to accumulate barrels in more expensive places, including on ships. The more widespread, the more economical alternative storage options.
Barrels accumulate at an unprecedented pace, increasing the risk that global spaces will run out of storage soon.
A report by the US Energy Information Administration earlier this week showed that the number of barrels of oil in commercial stores rose last week, by the largest number ever.
Although OPEC + reached a historic agreement, the effects of the oil price war remain. The barrels continue to flow to the United States, flooding the market.
The seven-day average flow of exports from core OPEC countries and Russia increased by 3.5 million barrels per day in April compared to March, according to Kleber Data.
Meanwhile, demand decreased dramatically. Social divergence guidelines canceled many passenger trips, forced people to work from home and closed factories. This means that there is less appetite for motor gasoline, jet fuel and other oil products.
Oil under $ 20 is a nightmare for high-cost US shale oil companies, especially those that have incurred a large amount of debt to pay for drilling projects that have now become uneconomic. Many will have to stop production, which dealt a severe blow to the prosperity of American oil.
Rystad Energy recently estimated that 140 US oil producers could file for bankruptcy this year if oil stays at $ 20 a barrel, followed by another 400 in 2021. This will cause countless jobs to disappear.
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