The Oil Market is Taking an Atomic Hit

The coronavirus is not the only thing that is affecting people around the world. Saudi Arabia and Russia are involved in an all-out oil war that is pushing barrel prices to decades low. Gas prices have dropped to new lows which are helping save people thousands of dollars in gas per year. And now the virus is keeping people home more so the demand for gas is dropping dramatically. Things are looking great for consumers and fleet companies everywhere.

Michael Lynch is the president of Strategic Energy and Economic Research. He has stated that “The most recent modern bottom low was about $18 a barrel for West Texas Intermediate crude, on an inflation-adjusted basis, and we could test that now, as long as neither Russia nor Saudi Arabia blinks.” Both countries are producing more oil in an attempt to produce more than the other. They hope to drive the other out of certain markets.

But smaller oil companies around the world are struggling to keep up. The drop in stock prices has caused many cash strapped companies to adjust their plan to just stay open. Lynch also stated that “The problem is that distressed companies might feel the need to dump at any price, which will create pain throughout the industry unlike anything seen before.” They are having to get creative until things turn around for them.

The massive output in production has pushed the price per barrel to all-time lows. One report showed the following by way of demand “March and April could be down by as much as 10 million barrels a day, leading into an estimated world supply surplus ranging from 4 million barrels to 10 million barrels a day from February to May of this year.” There has never been this kind of surplus for oil in the world. People have always been aggressive consumers which kept the demand high.

The coronavirus may have created a low demand but two nations are creating a massive amount of oil that the world is not ready to use. This will only push the price down even further. Saudi Arabia and Russia were supposed to have reached a production level, so each nation is producing as much as the like. This has created a price war. Each company is hoping that the price war will benefit their country.

One expert stated that “Two million BPD is what OPEC+ countries are realistically able to add next month, based on their storage, spare capacity, and ramp-up capabilities. Another million BPD could come if a cease-fire is agreed upon in Libya and the country reaches pre-shut-in levels.” The world is ready for cheaper gas prices. The higher prices have kept people from being able to pay off debt and other bills for several years. But now they are going to find more money in their wallets because the price of gas is heading down.

Other factors that are helping the gas price take a fall are the flight cancellations and industry shutdowns that are happening all around the world. People are just staying at home. Engines are off and people are enjoying just staying at home.

The economy was ready for the virus to hit. Some people are saying that the economy was weak, but facts proved them wrong. If the economy was weak, then it could not have weathered the storm as it has so far. The stock market would have crashed, and people would have been lining up to buy bread and look for work. But right now, things are beginning to strengthen.

People are being fed lies by the media which has created panic around the country. Louise Dickson who is with Rystad Energy has stated that “This is the most dismal oil demand picture we have witnessed in a long time, with a simultaneous collapse in jet fuel, gasoline, shipping fuel, petrochemicals, and oil used for power generation. And unlike structural economic collapses, we don’t know when the corona[virus] effect will ease up—markets could be wrestling with the virus well into 2021 in a worst-case scenario.” Rystad paints a good dismal picture. In a way, she is hoping for an atomic fallout from it all. President Trump will be proven right when he says things will come roaring back after it is all over.

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