US, WASHINGTON (ORDO NEWS) — The oil market faced a “double crisis” after the collapse of the OPEC + alliance, which affects the growth of oil supply, as well as a slowdown in the global economy, which reduced demand, said oil guru Dan Yergin, writes CNBC.
“The collapse of OPEC + is only part of the picture,” said IHS Markit vice chairman on Monday. “The main thing is coronavirus and the slowdown of most of the global economy (world).”
According to data collected by Johns Hopkins University, the number of infected people worldwide exceeded 700 thousand people, and almost 34 thousand people died from COVID-19.
Countries around the world have imposed travel bans to combat the spread of the virus.
“Cars don’t drive on roads, planes don’t fly in the air, plants don’t work, people don’t go to work,” Yergin said. “We see that in April this year oil demand may drop by 20 million barrels per day.”
“This is unprecedented. It is six times more than the biggest decline during the financial crisis (in 2008),” he added.
According to OPEC estimates, global oil demand in 2019 was about 99.67 million barrels per day.
Although demand will fall, large producers such as Saudi Arabia and Russia have announced that they will increase supply in April after the expiration of the OPEC + agreement to reduce oil production.
“This is what people are looking at … Where are you going to put all the butter?” – he asked. When oil reserves run out, prices could fall even more, he added.
“I think that the prices we are talking about, which you are talking about today, are really forerunners. April will be a very difficult month,” the expert said.
Since the beginning of the year, oil futures have fallen by more than 60%. On Monday afternoon in Asia, the price of Brent crude fell 7.9% to $ 22.96 a barrel, while the price of WTI fell 5.35% to $ 20.36 a barrel.
Yergin also said that any possible solution to the price war in the oil market is likely to be taken within the framework of the G20, which includes other oil producing countries. He noted that although the United States and Saudi Arabia have good relations, Washington and Moscow do not have many platforms for communication.
“It is possible that the G20 makes it possible to find a solution here and help stabilize the industry in a very difficult period, while the pandemic continues,” Yergin summed up.
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