The global pandemic has affected the industrial and natural resources sector. The price of crude oil has been reduced due to a shortage of storing units.
Due to the pandemic, the consumption of oil went through a major decrease. In West Texas, the oil delivery was lowered down to 25%, with a price reduction of $12.78 per barrel. The cost rate of Brent crude oil has also been reduced to $19.99. The decrease in delivery is leading to fluctuating oil prices.
According to Lindsey Bell, due to the depletion of buyers, the quantity of oil has increased and it is exceeding the storage units. The static industries and no general transportation have resulted in less oil consumption.
The lockdown imposed all across the world by the governmental authorities has to lead to a removal of 30 million oil barrels. The market has no further demands for oil stock since it cannot be utilized anywhere, due to pandemic.
The current crises faced by the oil-producing countries have initiated a price war between two major oil production hubs, Russia, and Saudi Arabia. The storage units are filled to their limits while the oil production is exceeding.
According to the US benchmark, they have faced a crucial price downfall of 32%, for the first time. The global price benchmark has reduced to 24% with the falling oil prices.
A meeting was held between the substantial oil producers to discuss the current crises faced by crude oil production. The meeting came to an end on a mutual decision of reducing oil production globally.
Global oil production will now be lowered by the reduction of 20 million barrels daily. A reduction of 9.7 million barrels will be done by The Organization of the Petroleum Exporting Countries (OPEC).
According to research by Michael Hsueh, the US is also near to reaching its storage unit limitations. The situation is getting inadequate for countries all across the world. He further mentioned that the major oil-consuming industries would keep on shutting down; the oil prices and production can enter many worsening conditions.
For now, the only solution to the current crises is the reduction of lockdowns. And this will only be possible if the pandemic ends soon.