23 November, 2020

Opinion | It's Slippery As Oil And As Crude As It Can Get

COVID-19 has infected crude oil producing countries in more ways than one, threatening economies of some politically fickle states, writes energy expert Shreerupa Mitra

Opinion | It's Slippery As Oil And As Crude As It Can Get

March 5 will be marked in red in crude chronicles. That day, a carefu­lly-seamed pact to cut global oil supply—between rivals Saudi Arabia and Russia, among other producers—was torn apart. Its demise kick-started a war between the US, Saudi Arabia and Russia that threatens to collapse prices to unprecedented levels. Such a scramble for market share has been seen before. However, this time two black swans twist the tale into unprecedented, and menacing, territory.

Unlike earlier, there are no swing producers today with a discretionary grip to swerve supplies. In addition, demand destruction due to COVID-19 shows a massive silhouette across collapsing consuming centres, like Europe and the US. The International Energy Agency (IEA) has three demand cases: a base case where the virus’ impact lasts till March, a low one where it spills into the second quarter, and a high one where it extends beyond. Oil markets are skittish with plunging demand and a supply overhang of about 3.5 million barrels per day (mb/d) in the first quarter.

There are three...



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