We only see the fall in oil prices as before accepting West Texas Intermediate fees to very negative ground.
There is no index that is greater than the level of financial consequences of coronavirus. With boundaries closed and many of the planet’s inhabitants urged to remain at home, transportation has almost stopped.
How To Do Negative Cost Changes?
This sector has not yet succeeded in producing fast enough to offset the decline in demand. Another mechanism that generally stabilizes costs, US oil storage, also seems to be close to capacity.
West Texas Intermediate is generally stored in the cushing center in oklahoma which is about to be complete roads.
That’s why costs become negative. Dealers with a contract to take oil shipments in May are afraid that they will not have the ability to maintain it.
Not all petroleum contracts are unprofitable. The contracts between West Texas Intermediate for June and the following months remain optimistic, representing a sense of source and demand imbalance that will soon be corrected.
Brent, global costs, remained optimistic, down to US $25.57 a decrease of around 9%.
Not Limited In The United States
There is no guarantee that a clear storage problem from the United States will not spread to other niches.
That is despite OPEC-Plus’s conclusions (mostly Middle Eastern members from the Organization of Petroleum Exporting Countries and Russia and other ex-Soviet countries) to react to this free decline by cutting production by 9.7 million barrels every day, completing the duel flow production between OPEC and Russia.
The near future doesn’t look good. With rising unemployment, market stuttering and financial markets falling, the prospects for a significant recovery in the oil market seem far away.
The US, this time the exporters themselves through shale oil, will end up in exactly the same way as conventional exporters from the Middle East.
Historically, the oil market was considered great in predicting a recession, but in this case the cause might be different.
Now businesses might start thinking about the ideal location for oil shops is a natural one which makes it on the floor.