Insight and inspiration in turbulent times.
The long-awaited crash in the oil markets came last week when traders finally realized that oil consumption was so low and production was so high that the world was within weeks of having no place to store crude and oil products.
The global demand for oil is expected to be down by nearly 30 million (or maybe even 40 million) b/d in April, according to the latest estimates. Some forecasts still optimistically assume that demand will bounce back in the second half of the year in a “V-shaped” recovery.
It was a volatile week as the world’s major oil producers struggled to find a way to raise prices from ruinous levels as the global consumption of oil sank by about a third from pre-virus levels.
Last week saw one of the biggest price leaps in the history of the oil industry, with US futures surging from around $20 a barrel at mid-week to a close of $28.34 on Friday.
During these times of tremendous turmoil, it may seem a little irrelevant to change the name of an energy newsletter and then bother to explain why. We acknowledge the overwhelming concerns of the day, knowing that your focus is elsewhere. We hope this missive finds you all in good health and reasonable spirits.
The market situation changed rapidly last week. On Monday, the oil traders were focused on the Saudi price war. By week’s end, however, the Saudi initiative had been overshadowed by the rapid spread of the coronavirus and its impact on oil demand.
Global oil consumption is in free-fall, heading for the biggest annual contraction in history, as more countries introduce unprecedented measures to fight the coronavirus outbreak. Travel bans, work-from-home, canceled vacations, and disrupted supply chains across the world all mean reduced demand for fuel.
Last week saw upheavals in the financial and energy markets as the coronavirus continues to spread rapidly across the world and the OPEC+ production limiting agreement broke down.
As the coronavirus epidemic spreads to some 60 countries, the outlook for the oil industry and, indeed, the global economy is undergoing a sea change.
Oil prices settled lower Friday, ending eight consecutive up days, due to the increasing spread of the coronavirus outside of China. London settled down 81 cents at $58.50, and New York finished 50 cents lower at $53.38.
Oil prices rebounded last week as traders decided that the coronavirus was not going to expand much further outside of China and that control measures were starting to work. WTI closed out the week at $52 a barrel and London at $57.
Oil prices posted a fifth weekly decline, weighed down by the loss of demand from China caused by the coronavirus outbreak. OPEC and Russia tried all week to come up with a unified position on how to contain the price slide.
