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article imageGlobal oil prices getting low even as demand is falling

By Karen Graham     Apr 6, 2020 in Business
Wall Street opened sharply higher on Monday, joining in a global rally after some of the hardest-hit countries showed signs that the worst of the coronavirus outbreak may be on the horizon. The same cannot be said for crude oil prices which saw a decline.
The S&P 500 was up 4.5 percent, as of 10:30 a.m. Eastern time. It’s already on pace to erase all its losses from the prior week. The Dow Jones Industrial Average rose 964 points, or 4.6 percent to 22,017, and the Nasdaq was up 4.5 percent.
Oil prices, on the other hand, fell Monday as the world waits for the Organization of Petroleum Exporting Countries and its allies, a group known as OPEC+, to meet on Thursday, instead of Monday, to discuss cutting production, according to CBC Canada.
Brent crude, the international oil benchmark, sank 3.2 percent to $33.05 a barrel while US marker West Texas Intermediate dropped 5 percent to $26.90 a barrel, reports the Financial Times.
However, Russia and Saudi Arabia traded barbs over the weekend, putting a successful meeting to cut supply and put a floor under prices on Thursday in jeopardy.
It is “clear that tensions between the Saudis and Russians are still high, and both are playing a blame game over who was behind the failure of the Opec+ meeting in early March”, said Warren Patterson, head of commodities strategy at ING.
It seems that one sticking point in the agreement to cut production may hinge on whether the U.S. will also agree to the cuts. According to Oil Price, a Bloomberg report from last week has indicated Russia would only agree to cuts if the United States cuts its production, too.
Of course, the United States has given no indication it was ready to cut production. Many analysts are warning that a looming storage capacity shortage would push prices even lower.
With an estimated 250 million barrels of crude and refined products already being stored on the water, we have “a commodity that the world doesn’t need," says Ben Luckock, co-head of oil trading at merchant Trafigura Group.
At the same time - there is the coronavirus pandemic. With many nations issuing "stay-at-home" orders, the pandemic has crippled demand for oil. The International Energy Agency’s Fatih Birol is somewhat pessimistic. Birol told Reuters on Friday that measures to contain the spread of the coronavirus had lead to an “unprecedented” demand loss that could reach as much as a quarter of global consumption.
More about Oil prices, Falling tree, Opec, covid19 pandemic
 
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