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Oil price at -100 dollars?

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After what happened in the oil market on Monday, the world economy will not be the same again. And this is normal after oil, the base of the world economy, was quoted in negative territory for the first time in its history. But if a price of -36 dollars per barrel is traumatic enough, Bloomberg analyst Javier Blas wonders if it is possible for oil to reach -100 dollars.

The collapse in the oil market

It all started with the Coronavirus. The disease born in Wuhan that has already caused thousands of deaths to regret worldwide. It has brought with it the paralysis of important sectors of the world economy. Well, in the absence of a vaccine or effective treatment against the virus, the only way to prevent it from wreaking havoc on our society is quarantine and social distancing.

This has caused the interruption of productive and commercial activities, leading to a reduction in the demand for oil worldwide. As large industries and businesses consuming electricity are paralyzed, as well as the means of transport that demand fuel.

Therefore, this collapse in demand has generated an overproduction crisis in the oil industry. Causing a surplus production of 20 million barrels per day. At a time when crude storage sites are also running out of space. What makes it foresee that by the month of June, there will be no more free space in which to store oil.

Will we see oil at -100 dollars?

Thus, although after the collapse of Monday the oil price has been recovering. Going from -36 dollars a barrel in which it was quoted up to just over 10 dollars, we may not yet have seen the floor of the crisis. At least this is the opinion of Paul Sankey, oil analyst at Mizuho Bank. For whom a price of a barrel of oil of -100 dollars is not only possible, but also probable.

If the reserves are full, it is possible that the oil will reach -100 dollars.

For Sankey, the market management crisis that does not allow all the oil produced to get consumers willing to pay for it, would only be in its initial stages. With India, one of the main buyers of crude oil globally, announcing that its refineries are at 95% of their storage capacity. And Nigeria reducing oil production by running out of space to store it.

For this reason, if we do not see a revival of industry and commerce in the short term, we could reach a situation in which the global oil stores are overwhelmed. With the consequent reduction in production, and bankruptcy of oil-related businesses. Therefore, if oil reaches -100 dollars, it could be a possibility that deepens the global recession that is already foreseen for the year 2020.



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