Will the global oil industry recover?
Can the global oil industry be able to survive the vicious Coronavirus pandemic?
In late December, in Wuhan, China, Coronavirus broke loose. And then, slowly but surely, it spread all across the globe, killing thousands and thousands of people and infecting millions of people.
And because of the spread of Coronavirus, the global oil industry took a massive blow, as due to this reason, the price and the demand for crude oil, was brought down drastically. On December 31, 2019, when the New Coronavirus was reported by China, US $61.06 was what WTI oil future was being traded at. And on March 23, 2020, the price fell to US $23.36.
Strategic Energy & Economic Research Inc., President, Michael Lynch stated:
”The background psychology right now is just massively bearish. People are concerned that we are going to see so much build up of inventory that it’s going to be very difficult to fix in the near term and there is going to be a lot distressed cargoes on the market. People are trying to get rid of the oil and there are no buyers.”
It has been predicted that the global oil industry will take a huge hit because of the Coronavirus pandemic and the demand for oil on an international level, may drop by as much as 15-20 mbpd (million barrels per day).
RBC Capital Markets, Global Energy Strategy, Managing Director, Michael Tran, says:
“There is little to prevent the physical market from the further acute downside path over the near term. Refiners are rejecting barrels at a historic pace and with U.S. storage levels sprinting to the brim, market forces will inflict further pain until either we hit rock bottom, or COVID clears, whichever comes first, but it looks like the former.”
In their latest oil market outlook, published by the International Energy Agency, it is stated that it does not feel that the demand for oil will have increased by the end of the year 2021. They have predicted that by the end of 2021, the demand for oil the world over, would still be at around 2 million barrels a day below that which was seen prior to the Coronavirus pandemic.
Prince Abdulaziz bin Salman, Saudi Energy Minister declared:
“There have been encouraging signs of recovery in demand and a rebalancing of global oil markets. The world economy has embarked on the long journey of easing the lockdowns, but there will inevitably be setbacks and reversals.”
This is a result of allies and the Organization of Petroleum Exporting Countries (OPEC) producers promising to meet supply cuts.
On June 11, 2020, at the Webinar on ‘Energy Issues in the post-COVID-19 World’, HE Mohammad Sanusi Barkindo, OPEC Secretary General, stated:
“Our analysts at the OPEC Secretariat expect a severe global economic downturn this year, with the economy contracting by 3.4% compared to global GDP growth of 2.9% in 2019. The most recent forecasts from the World Bank reveal an even more pessimistic GDP growth outlook of minus-5.2%, while the OECD just released their forecast (June 10th) showing minus-6.0% growth for 2020.
These downside revisions merely reflect the high risks and associated uncertainties. We project a historic decline in world oil demand of nearly 9.1 mb/d this year, to around 90.6 mb/d. Before COVID-19, we expected world oil demand to top 100 mb/d in 2020, up by 1.08 mb/d from 2019.”
Rystad Energy analyst, Paola Rodriguez Masiu states:
“There is enthusiasm in the market that oil supply is still under control. A positive Opec+ meeting does that and yesterday’s session helped renew confidence.”
On June 18, 2020, the daily basket price of OPEC was $37.70 a barrel.
Will the global oil industry recover? The world will have to wait and see.