• Historical drop.The oil war between Russia and Saudi Arabia reaches the pump

World demand for oil could have fallen by 10% due to the slowdown in the world economy triggered by the coronavirus. That is the estimate of one of the biggest traders of this raw material, Vitol , based on the situation in countries like Spain, Italy or Germany , in statements to the Reuters news agency.

So the crude market has crashed again. He started to rise, after the publication by The Wall Street Journal, of a news item claiming that the President of the United States was going to pressure the leader of Saudi Arabia, the crown prince of that country, Mohamed bin Salman , to limit its production and Thus end the crazed price war it launched two weeks ago against Russia . But, as time passed, the indications that this conversation had occurred, or had consequences, did not materialize. That brought the barrel price down by 10%, and led Wall Street to fall 3% .

As a consequence, traders turned to fundamentals again. And the fundamentals are a demand in free fall. California and New York , which accumulate more than 15% of the gasoline consumed by the United States, are beginning to restrict the movements of their citizens in a similar way to that of Spain.

As the pandemic spreads to the United States, the chance that the drop in demand will be greater than 10% increases. Some analysts forecast the collapse to be 20% . Furthermore, the problem is compounded because there is hardly any extra storage capacity for crude at this time. This means that the oil that is pumped must be commercialized immediately, which further reduces the producers' margin of maneuver to negotiate prices.

Thus, the market is facing what will probably be the biggest drop in demand since there are statistics from the oil sector worldwide. And that, in turn, is tightening the nuts on the companies. The oil company Petrobras has had to use an extra credit line of 8,000 million dollars (almost 7,500 million euros), in what constitutes a hard blow to the plans of the president of that country, Jair Bolsonaro, to privatize the company. In the US, Donald Trump has announced the purchase of 77 million barrels of crude to fill the Strategic Reserve that that country has in the event of a crisis. Washington has declared that it will only buy oil extracted from the United States. But it has a problem: the crude it needs to complete the Strategic Reserve has to be high in sulfur, and the one extracted in most parts of the country is not.

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