The cost of WTI crude oil at the close of trading on the New York Mercantile Exchange (NYMEX) stopped at $ 37.63 per barrel, which means that producers themselves will pay extra for their raw materials to customers. Price reduction for April 20 is estimated at 300%.
Noting that the price of raw materials for the first time went into negative values, despite the fact that oil futures have been traded on exchanges since 1983.
Such a large drop in cost is due to unusually low demand amid the prevalence of coronavirus COVID-19 infection in the world and efforts by countries to combat the virus. At the same time, even the OPEC + deal did not help to avoid a collapse in the market. In mid-April, alliance members agreed to reduce oil production by 9.7 million barrels per day from May to June. The main obligations assumed are Russia and Saudi Arabia - reducing production by 2.5 million barrels per day, to 8.5 million.
Meanwhile, the report of the International Energy Agency (IEA) says that in April, oil demand will fall by 29 million barrels per day and will reach its lowest level since 1995.
"Even assuming that restrictions on movement will be lifted in the second half of 2020, we expect that world oil demand in 2020 will decrease by 9.3 million barrels per day compared to 2019, stopping almost a decade-long growth rate." - it was said in the document.
“Someone has lost billions of dollars”
According to the director of the Energy Development Fund Sergey Pikin, the collapse of oil quotes on the American futures exchange is due to speculation by market players.
“The May close of futures is taking place, and against this background there is an active speculative game. This is not about oil at all, anything could have been in place of the oil. Since oil as a product that is actively sold and bought, there is an active game of speculators. To how the vaults are filled, it has an indirect relationship. While there is no peak of storage filling, the backlog still remains. According to forecasts, they will end in mid-May, another three-plus weeks, ”the source said.
According to him, exchange-traded players took the position of "lowering everything down", which led to the fact that those who traded in favor of the increase lost, and someone "lost billions of dollars."
In turn, economist Mikhail Khazin, in an interview with RT, explained that the unstable situation in the oil market is associated with global panic.
“Since we entered a period of great recession, oil prices will be lower than they were in the previous ten years. But how much is a question that has no answer. There is panic in the world, so talking about the price is rather pointless. This is the price of futures, but it is not yet clear what the price of contracts for real delivery will be. When the panic is over, I think it will happen in late May - early June, we can talk about long-term prices, ”said Khazin.
- Reuters
- © Ints Kalnins
Cartel Conspiracy
The situation on the market was also appreciated by the former Prime Minister of Russia, Deputy Chairman of the Security Council of the Russian Federation Dmitry Medvedev.
“What we observe with respect to oil futures contracts is very reminiscent of a cartel deal. Based on our experience in the gas sector, we offer to sell oil on a take or pay basis (take or pay. - RT ). We are ready to discuss this option with our partners, ”Medvedev wrote on his page on the VKontakte social network.
At the same time, the representative of the Iraqi Oil Ministry, Asem Jihad, explained that the WTI oil price drop to minus values is natural, since the situation with the spread of coronavirus has led to stagnation in the market, overcrowding of stores and an excessive supply level.
“The most important factors that caused the collapse in oil prices are the restriction of passenger and industrial flights, the lack of fuel consumption, in view of all this supply more than demand. The process is related to the degree of control over the spread of coronavirus and the gradual removal of restrictions on movement: as we return to the natural pace of movement, this will have a positive effect on oil consumption and prices. In the meantime, there are restrictions, we will see further losses in the markets, ”RIA Novosti quoted him as saying.
Haynes & Boone previously reported that between 2015 and 2019, a total of 208 energy companies from North America went bankrupt. Their total debt amounted to $ 121.7 billion. It is expected that in 2020 the number of bankrupt producers of raw materials will only increase.