Due to the global Covid-19 pandemic which has led to severe travel restrictions in order to slow the spread of the deadly coronavirus, storage space for oil may evaporate as gasoline is markedly underused.
The severe travel restrictions, as a result of social distancing recommendations and forced quarantining, has meant that a significant number of international flights have been grounded and local road travel immensely curtailed.
Several reports–some falsified–detailing environmental improvements have circulated social media.
According to the piece by CNN Business, as Saudi Arabia and Russia have engaged in an oil price war, supply has remained constant amid the global crisis.
The author asserts “That could mean a supply glut so epic that the world will soon run out of room to store all the unneeded barrels of oil.”
However, the price war may cause prices to bounce back, with Brent Crude Oil jumping 10% to $27 a barrel.
Trump, at a White House Press Conference, said “It’s very bad for Russia, it’s very bad for Saudi Arabia. I mean, it’s very bad for both. I think they’re going to make a deal.”
The US President also expects the two countries to “work it out over the next few days.”
Jeff Wyll, senior energy analyst at Neuberger Berman, said “The market is starting to signal that not only is there no demand for this crude, eventually there could be nowhere for it to go,” which is something which has not happened in over twenty years.
On Monday, oil fell by 7% reaching an 18-year low, making it the worst quarter on record as it plunged by two-thirds in the first three month, according to The BBC.
Another CNN Business article reported:
US crude plunged nearly 7% and finished at an 18-year low of $20.09 a barrel Monday as the coronavirus pandemic continues to deal a devastating blow to energy demand.
At session lows, oil touched $19.27 a barrel — the weakest intraday price since February 2002.
Brent crude, the world’s benchmark, tumbled as much as 13% and fell to as low as $21.65 a barrel, its lowest point in 18 years. Brent settled at $22.76 a barrel, the lowest close since November 2002.
The recent oil glut saw a Wyoming crude grade bid for at negative 19 cents a barrel.
However, the oil was sourced far from water which plunged its price into negative territory. Gas extracted from West Texas also traded in the negative due to a lack of local pipelines, making distribution very difficult.
A fall in shale oil production–due to production costs–may have also contributed to a rise in prices because of a slight drop in supply.
Former Energy Secretary Rick Perry recently appeared on Tucker Carlson Tonight to warn Americans and President Donald Trump that a massive reduction in oil prices would jeopardize the United States’ national security.