By
Julia Sakovich
January 18th, 2024
Oil benchmarks in the U.S. hit a two-decade low on Sunday after the brewing uncertainty of storage for excess oil. The frozen economic activity has plunged the demand for oil worldwide.
The global oil market is undergoing the most uncertain period over the few decades owing to the coronavirus pandemic. The global demand for oil has plunged considerably as a majority of the countries have announced lockdown to contain the virus spread. On Sunday, oil prices fell to its 21-year low after a sharp selling owing to weak demand. The Brent Crude index plunged 2.85% with oil price going to $27.28 per barrel. Over the last year, Brent crude price has tanked nearly 60%. A majority of this correction comes in January 2020.
Sunday’s oil market crash was reportedly due to the growing uncertainty in storing excess oil. With businesses on a hiatus over the last month, the oil demand has gone significantly low. Adding to the woes of the oil market, the OPEC+ allies triggered an oil war last month leading to excess production amidst the slowing demand.
Hence, the oil reserves across the globe are getting full quickly as consumption dives. However, now that the OPEC+ allies have reached an agreement, investors are still not confident of the rise in demand. The coronavirus situation gets worst in major economies like the U.S. and Europe. Thus, it is already too late for the OPEC and its allies to do any damage control.
Besides, there’s no clear sight as to when the businesses will resume back to normalcy. On Sunday, the West Texas Intermediate (WTI) oil dropped to its lowest levels in two decades since 1999. The U.S. oil benchmark crashed 21% with oil price slipping below $15 per barrel. At 6:00 AM CST, the WTI Oil index has plunged 37% with oil prices going to $11.33 per barrel.
Oil Prices Are Down, Is It the Right Time to Kickstart the Economy?
With nearly a month of lockdown in major cities across the globe, businesses have gone bust. The IMF has already given its prediction for 2020 saying that the global economy will contract 3% by the end of this year.
Over the last few weeks, the U.S. has already lost over 20 million jobs. Besides, analysts think that if the COVID situation continues for a month more, this could go to 47 million job losses. Well, the world leaders are having a tough time balancing their act between lockdown and kickstart the economy again.
On the other hand, the coronavirus situation seems to stop nowhere for better. The total deaths in the U.S. along have crossed 40,500. However, there’s been a recent standoff between the U.S. President and other state governors on lifting restrictions and permitting movement to some businesses. If we look at other parts of the world, Germany has allowed to re-open shops starting Monday.
New Zealand prime minister Jacinda Ardern has said that they would ease the country’s stringent lockdown starting next Monday. Similarly, some beaches in Sydney have been re-opened signifying the effort to move towards a normal life.