The oil industries in the U.S and many other countries have gone through major losses ever since the coronavirus hit.
This is due to the massive decrease in travel as most people are now working from home, schools and colleges are closed and inter-city travel has almost completely stopped.
It is for this reason that during the weekend, Saudi Arabia and Russia decided to cut down their oil production significantly, setting a new record for oil production cuts.
President Trump was very happy with this decision, congratulating and thanking the presidents of both countries as it meant thousands of energy jobs in America would be safe now.
However, the decision did not have the best impact on oil prices of the country as they seemed to have barely changed on Monday and more ground was lost by the S&P 500 energy sector.
Wall Street was not too excited about the decision either as it realizes that while these OPEC cuts do help, they are still not enough to deal with the excess oil supply crisis.
ClipperData’s commodity research director, Matt Smith, said that while this move will certainly help stabilize the oil markets, it will still not be enough to bring balance back to the markets.
The main problem that needs to be eliminated is the lost demand for oil in the world as a result of all forms of transport coming to a complete halt.
U.S demand forecasts of oil keep getting worse and worse as the Bank of America predicts that the previously calculated drop of 4.4 million barrels per day is likely to increase to 9.2 million per day.
Things also look bad on the oil storage side as the global capacity for oil inventories is about to reach its maximum capacity.
Goldman Sachs is of the view that OPEC production cuts are only resulting in a 7.2 million barrels drop per day which is much less than needed and that this decision was taken too late to make a difference now.
Naturally, it does not seem likely that the oil industry is going to recover from this any time soon while gas prices can continue to drop to half of what they were last year.