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Crude Oil At 17-Year-Lowest Price, As Crisis Appears To Be Gaining Momentum

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Crude Oil At 17-Year-Lowest Price, As Crisis Appears To Be Gaining Momentum

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On March 30th, crude oil prices reached a 17-year-low, with the COVID-19 crisis and the Saudi-initiated oil price war.

US benchmark West Texas Intermediate fell 5.3% to trade at $20 a barrel, while international benchmark Brent crude was off 6.5% at $23.

The falls came after the death toll from the pandemic surged past 30,000 at the weekend as cases in hard-hit Europe and the United States showed no sign of letting up.

Consumption is expected to drop by 26 million barrels, or 25%, this week as social-distancing measures to contain the coronavirus now impact 92% of global GDP, analysts including Jeff Currie and Damien Courvalin said in a note. There’s been at least 900,000 barrels a day of announced shut-ins at the wellhead, with the true number likely higher and growing by the hour, they said.

“The ultimate magnitude of these shut-ins, which is still unknown, will likely permanently alter the energy industry and its geopolitics,” the analysts said. Landlocked crude prices are heading into negative territory and will eventually create an inflationary oil supply shock because so much production will have been halted, they said.

This mostly relates to US, Russian and Canadian crude oil.

The price war launched by Saudi Arabia almost three weeks ago after talks with Russia over price stabilization broke down has sent prices to their lowest level in 17 years.

The Brent crude price was around $65 per barrel at the start of January.

“In recent days there has been a lot of chatter that demand for oil is going to be hit severely in the months ahead, hence by dealers are dumping the energy,” said David Madden, market analyst at CMC Markets.

“The bitter price-war between Saudi Arabia and Russia is hurting oil too.”

Faith Birol, head of the International Energy Agency, yesterday said oil prices could fall by 20 percent with 3bn people around the world on lockdown.

“One would expect that Saudi Arabia will provide a constructive support to the stabilisation of the global oil markets based on their past record,” Birol said.

There is still no such constructive support provided by Riyadh of any sort.

At the same time, natural gas prices are also being affected, with them currently dropping, but chances are they will rise rapidly in 2021.

The bust in the gas sector brought production to a halt as even sub-$2.50 gas was largely unprofitable. Late last year, Chevron took an $11-billion write-down, and a big chunk of that was from its shale gas assets in the Marcellus. Pittsburgh-based EQT also announced a $1.8 billion write-down at the start of 2020.

The rapid pace of fracking in the US over the last few years led to a supply glut even prior to the onset of the coronavirus. Associated gas in the Permian, along with record production in the Marcellus shale in Appalachia, crashed prices below $2/MMBtu at the start of 2020.

“[A]s we enter the 2020/21 winter, we expect production declines to be visible enough that gas prices will rally sharply in our view to help summer 2021 reach comfortable inventory levels,” Goldman Sachs wrote in a report on March 24th.

“Under current forward prices, we believe this would lead US natural gas balances to a record-low level that summer, nearing only 2.2 Tcf,” Goldman analysts wrote. “This would be the result of an estimated 2.4 Bcf/d summer-on-summer decline in production matched up against a 5 Bcf/d expected increase in demand.”

“This exceptionally tight outlook suggests current forward prices are not sustainable,” the bank concluded.

Regarding oil Goldman Sachs said Brent crude will likely stay near cash costs of $20 a barrel with temporary downward spikes as waterborne varieties are better positioned compared with landlocked oil in the U.S., Canada and Russia that’s sitting behind pipelines.

The current oil crisis will see the energy industry finally achieve the restructuring it so badly needs, although a push for de-carbonization from capital markets may hamper the broad investment required for a recovery, the analysts said.

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  • occupybacon

    Let’s observe petroruble evolution right now

    • Jens Holm

      Yes, thats a kind of test for all of us. The last many days we have observed people here telling this is no problem for Russia and they have a lot of gold under their pillows.

      Norway seemes to be hit hard. Their currncy has lowered a lot, but at least they do have bilions in money as a reserve.

      • Jake321

        Yep. Putz Putin and his RF on are the oily slide into the dustbin of history. But look on the bright side. They can cry on the shoulders of their past Glorious Failed Soviet and Czarist Russian Empires. Bye bye…

        • Jens Holm

          I am so tired about people here are learned that Russia is doing very well and USA will collapse next week.

          • Jake321

            Sorry, missed this earlier. Yes, it is a shame. I come here because I know what these dregs are. Most are my enemies or represent how my enemies think. It is always good to know your enemies better. Some are personally really enemies. Lots of others are institutional enemies like the Putin Trolls. They have a job to do like a solder has a job to do. They get their Kopecks but more important, many get a draft deferment. Also, I find it educational in other ways as well as kind of entertaining. And keep working on your English. It’s getting a little better. Also, keep at them. But never expect to change them.

          • Jens Holm

            Nice ho hear You are still alive:)

            I am semiretired reserve in my job and sometimes has a lot of hours and sometimes none or almost none. I replace all. My plans was to to have 20 hours and go sown from 37 hours. Actually I have about 30 and becomes rich having no time for spending the money:)

            I know who they are. I dont write for them but for the normal ones reading and writing here too.

            And Yes so many are stupid or enemies. A lot is forbidden for them to debate as well.

            I had written no english for 40 years when I started here. I once was relative good at it, but I cant find any education to improve a lot. So I just improve in more words and a few other things.

            I dont expect but they should learn we want them to change. Its like cleaning. You have to do it all Your life.

            I have been commenting ME for many years. It started after the propaganda book named 6 days in June. I changed to here because some danish muslims told, I know nothing.

            I do and did. Many here dont know a thing as well as they have total memory lack.

            Best regards Jens Holm

          • Jake321

            Sorry I missed this earlier. Good luck there. By the way, great Denmark didn’t and don’t have the lax attitude towards this as your Swedish neighbors. I like both your countries and people. Too bad what the Swedes are doing to themselves.

        • Lone Ranger

          Sounds mire like the collapsed U.S. Empire with adolf Trumpstein ;)

    • Alex

      I think that Houthis will receive stronger weapons now, from anonymous friends.

      • Jens Holm

        Pepperspray??

        • Alex

          That is that the thing that the refugees will receive to combat you in your own country :)

  • Lone Ranger

    Bye bye Shale oil, you wont be missed.

    • Jake321

      We lose shale oil. You lose your country. Not a bad deal, Igor.

      • Lone Ranger

        Nah, Russia has survived much worse.
        And the U.S. Empire is already gone.
        Better luck next time…

        • Jake321

          Nahhhhhhhhh…you have lost two Russian Empires in the short time the US has been around and made itself the richest most powerful country ever. And your third, the RF, will fall while the US continues to grow. Just the way it has been and will be.

          • Lone Ranger

            U.S. is the poorest nation with the biggest debt, tent cities, drug epidemic, no universal healthcare and an infrastructure that is falling apart.
            U.S. was list when the deep state killed JFK.
            And now the U.S. Empire is falling…
            While Russia has been restored.
            Better luck next time…

          • Jake321

            LOL…you do have quite fanciful wet dreams, Igor. Or is this just from a Vodka induced stupor? Come crow later next month. It will be bad for the US. But when we step in the doo doo, you take a wild dive down the latrine. Bye bye…

          • Lone Ranger

            You keep repeating yourself.
            But its Russia sending aid to the U.S….

          • Jake321

            As do you. But worse, you keep repeating the same Kremlin Party Line cheat sheet lies. No Russian aide has come here. It may since Outz Putin knows he’s going really into to deep doo doo soon from the Pandemic and his stupid oil and gas policies. If any it, it will be in hopes of the US helping save Russia’s ass yet again as we did against Hitler.

          • Lone Ranger

            We are a bit unthankful today Jake arent we…
            The plane will arrive in a few hours, 80tons worth of supplies, more to follow.
            U.S. land lease program contributed 12% to all Russian war efforts.
            Helpful but not critical, while Russia defeated 80% of the German armed forces winning the European theatre and with that WWII.
            You are welcome, again…
            And as usual, better luck next time ;)

          • Jake321

            More like you are unthankful. You know that 12% is a gigantic amount, especially given how close Russia was to losing the war before the winter and our help gave you the time and ability to turn it around. But yes, Russia did the most to finally beat the Nazis.

    • Jens Holm

      I agree. Cheep Russian oil half price is better. Its like other kinds of mining. You close them, when You can find something cheeper or better or if its not needed.

      Several 1000 in USA will loose their jobs and some few hundreds will get new jobs. The dollar wont dislike it as long as its so cheep.

      As consumer I kind of low it but would prefare we went into windturbines and electric solar cells.

  • Joao Alfaiate

    The price of oil is an administered price. When the Saudis finally figure out that low oil prices are hurting them more than the Russians an arrangement will be made. Cutting entitlements in Saudi Arabia is an invitation to revolution, even MBS is smart enough to understand that.

    • Jake321

      We will see who blinks first as Russia heads into economic collapse starting later next month and the Saudis don’t.

      • Joao Alfaiate

        Between 1941 and 1945 the Russians lost about 26 million people during the Nazi invasion. The Russians also survived the Reds, Napoleon, the Teutonic Knights, etc., etc. Do you seriously think the fall of the price of oil will cause the collapse of the Russian state? Really? You want to go with that argument?

        • Jens Holm

          It will hurt. They have predicted themselves, they might have problems under 40 dollars and now its about 20.

          Their reaction is to sell more and cheep, but if the world market is full, they might even compensate with that.

          Sure, they will be in trouble. They have lowered a lot of things fx hospitals, medicine as well as pensions. Putin only has small amounts of gold under his pillow.

          Several here has predicted USA will go down. We will see.

          As Dane I am proud to say we invented profittable windturbines and the world are building a lot of them. We now cover 42% of our electricity with them but fx not heasting and electric cars.

          My best advice for the whole world is, that people having wind should change to that and solar elctricity. They are better and better and therefore can be used inmore parts of each country.

          We hardly have any smog apart from the cars.

          Central heating is a must too and in perfect danish systems. We export for billions of them. Many more should more or less copy that for heating and cooling then use oil, gas and even coal.

        • Jake321

          Never said it would cause the collapse of Russia but of the RF. Just like the collapse of the Russian Soviet and Czarist Empires collapsed but a residual Russia remained. There will still be a much smaller even weaker Russia. But no RF with new countries created out of the RF rubble. And Siberia may even speak Mandarin.

      • Lone Ranger

        You spelled the U.S. wrong as usual…

  • Jake321

    Bye bye Putz Putin and his RF. Do note that Saudi Arabia has more than twice the net wealth per capita as Russia. And for some strange reason, Arabs are not effected much by the Pandemic. By late next month, the RF will be heading towards collapse while Saudi Arabia will just be hurting. Oh, also note that there may be a recovery in natural gas next year but that will be way too late for the RF. Oh, and it wouldn’t see the turn around as much anyway, because brilliant Putin gave away most of the Siberian natural gas to China at a price tied to the price of oil. This means sales to China will be at a price below cost of production. So bye bye…for sure not sad to see you go.

    • Lone Ranger

      Keep dreaming Shlomo.
      Bye bye U.S. Empire…;)

      • Jake321

        What Empire? We keep offering Puerto Rico it’s independence or to become a state. But they keep wanting to stay a colony. Go figure. Well, there is Guam and American Samoa and the American Virgin Islands …quite the Empire.

        • Lone Ranger

          Of course the bribed cia run puppet govt wants to stay…
          You forget the 650military bases abroad and the dozens of occupied countries.
          Dont worry its coming to an end now.
          Same story as the Soviet Union in the late 80s.
          Russia has already sent help to the U.S.
          Returning the favir from 30years ago…

          • Jake321

            No Russian aid has been sent here yet. It may come in yet another Traitor Trump giving aid and comfort to our enemy Putz Putin by getting some stuff from Russia for propaganda purposes. But whatever might be sent would just be less for Russia that it will desperately need later next month when you will be begging the US yet again to help save you as we helped save you from Hitler.

            And you lie about US bases. Aside from Syria, we have NO bases any place that are not authorized by the legal government of the country where they are. There is no occupation. And the US presence in Syria is under UN authorization and international law.

            Yep, Russia has a lot of experience with collapse. Really big ones like your Soviet and Czarist Russian Empires. So it will be nothing new for you when your RF accelerates its oily slide to oblivion later next. month. Bye bye.

          • Lone Ranger

            Wrong.
            No UN authorisation.
            Same as there wete none at Iraq, Afghanistan or Serbia.
            Aside from that cia run puppet govts occupied by the U.S. rarely protest since they are paid and bought.
            Plane should be touching down in a few hours a fully loaded An-124.
            With around 80tons of supllies.
            Russia gave only 2% of its reserves away to Italy and the U.S.
            Has twice the hospital beds with 1/100th the cases.
            As usual better luck next time…

          • Jake321

            Yes, under both UNSC authorization and international law to fight terrorism. Afghanistan and Serbia are irrelevant so why play stupid? We have no bases in Serbia and we have the legal government’s authorization in Afghanistan. Because you call an internationally recognized legal government a puppet carries no weight. And if those supplies are sent on an AN124 we better all cross our fingers since it has one of the highest accident rates of about any large aircraft, 5 total losses out of 55 built. About a 10% total accident lose rate for ANY aircraft is kind of bad don’t you think? But Russians are used to techno fuckups. Isn’t that how we got this damn Pandemic to start with? Anyway, Russian Karma time is later this month, Igor. So hold down your victor laps for now.

          • Lone Ranger

            Wrong.
            There are no UN authorisation.
            Why would they be irrelevant?
            They are relevant.
            Yes you do, Camp Bondsteel in Kosovo, main isis training camp in Europe.
            You stole the land from Serbia while aiding terrorists and bombing the Capital Belgrade killing 5000civs, more than the civ casulties during 9/11…
            Terror state U.S…
            Of course it carries weight, because its True, thats why you are upset about it, but your magic wand tricks dont work on me…
            Afghan puppet govt will collapse, nothing but traitors and opium warlords on CIA payroll.
            Same will happen when the Soviets pulled out in 89.
            Civil war.
            Slow clap…
            You were beaten by the same guys you armed and supported against Russia.
            The circle is complete :)
            Antonov is one of the safest heavy transport ever built.
            It flies under the harshest conditions with twice the payload.
            U.S. lost plenty of C-130, C-5A Galaxy and C-17, carrying less cargo, under less harsh conditions.
            Aside from that isnt Antonov an Ukrainian company?oops…
            Your supervisor wont be happy about that…
            Most dangerous plane is the 737 by the way with around 200 hull loss accidents and 5000f atalitues.
            You are talking about Russian karma which is good nowdays.
            While bad karma has arrived to thd U.S. for the genocide you orchestrated in the past 20years.
            As usual better luck next time ;)

          • Jake321

            The 737 has had the same number of fatal crashes as the AN124, 5. About 55 AN124’s were built. About 7,000 were built. I know simple arithmetic is not your sting point but that’s about 10% of the AN124’s and less than 0.1% of the 737’s. You do have a very good track record of being wrong, Igor. Or at least your handlers do.

          • Lone Ranger

            As of February 2020, there has been a total of 481 aviation accidents and incidents involving all 737 aircraft, including 214 hull losses resulting in a total of 5,565 fatalities…

          • Jake321

            Good. You finally did your research. You forgot to note there were over 10,000 737’s built. And even assuming there was loss of life in all those hull lose incidents, the rate would be only about 2% for the US 737 compared to the about 10% for the Russian AN124. You claimed the opposite, Comrade Pravda.

          • Lone Ranger

            Actually you said the 737 had only 5 crashes…
            Proved you wrong…
            With 2000+ accidents thats still 20% not 2%.
            Like I said the most dangerous passanger jet ever….
            There is a reason Boieng is going belly up.
            But dont worry Airbus will take over…oh wait they already did, my bad :)
            Aside from that Antonov is still Ukrainian not Russian.
            Eventho its a safe jet.
            All accidents happened due to pilot error under extreme conditions or because of enemy fire.
            Better luck next time…

          • Lone Ranger

            P.S. 98% of all terrorists are created and funded by the CIA, Mi6, Mossad and the Saudi royal family.
            Only time you fight them is when they are losing against a third party and you have to destroy all evidence.
            Like tim osman and al big daddy…
            Bye.

          • Jake321

            LOL…you get sillier and sillier by the day. Soooooooo disappointing…

          • Lone Ranger

            Truth hurts, try to handle it.
            That’s all I can say.
            Americans lack.one thing the most…self critique.

          • Jake321

            LOL…sure, Igor. Like your silly and obviously false claim about the 737 compared to the AN124 accident rate. The Kremlin and it’s mouthpieces, whether in the old Soviet days or Putz Putin’s new want-to-be Soviet days, are represented by the truth as in Pravda. Orwell nailed you in 1984.

          • Lone Ranger

            As of February 2020, there has been a total of 481 aviation accidents and incidents involving all 737 aircraft, including 214 hull losses resulting in a total of 5,565 fatalities

          • Lone Ranger

            U.S. is the one using 1984 as an Instruction manual not Russia.
            Try some self critique sometime, it does wonders…

          • Jake321

            LOL…sure Comrade Pravda…

          • Lone Ranger

            Like I said Truth hurts…

          • Jake321

            LOL…sure, Comrade Pravda. Check page 97 of 1984.

          • Lone Ranger

            You should tell that to your deep state.
            1984 wasnt an instruction manual…

  • grandel

    Why is the drop in the price of oil always portrayed as a bad thing? It’s great for weary, embattled consumers! When are prices at the pump going to drop?