At the opening of the market on Monday 30 March 2020, the price of oil was at its lowest level for 17 years, with a fall of 6.5% for a barrel of North Sea Brent crude oil, which was trading at 23 dollars, a price that had not been seen since 2003. So let's go back over the situation in more detail.Trade Oil online
It is above all on the Asian markets that oil fell this morning, in the lap of the other financial markets and in particular after a worsening, during the weekend, of the health crisis of the coronavirus.
Brent thus falls by 6.3% and WTI also loses 5.3% with a price at 20 dollars a barrel. The main cause of this fall is of course the aggravation of the world pandemic of Covid-19, especially in the United States.
In barely one month, the Brent barrel has lost 53% of its value due to a very significant drop in demand caused by the paralysis of the world economy and certain sectors such as air transport or the automobile industry. This situation worsened further when Donald Trump announced that the possible recovery of the US economy in mid-April was more than uncertain.
Indeed and even after the peak of the coronavirus epidemic, Covid-19 will not have disappeared, which should lead to a long wait before factories and trade can resume as before. Many companies will also find it difficult to get out of this crisis and some will go bankrupt despite massive aid packages implemented by governments.
Another aggravating factor for the barrel of black gold is the war currently being played out between Saudi Arabia, Russia and the United States over oil production. It should be recalled that the OPEC countries and the major producers failed last week to reach an agreement on additional production cuts. Russia ignored OPEC's proposed cuts, triggering a price war with Saudi Arabia, which is trying to regain the market lead by increasing production.
The oil stocks are therefore very important today and some producers like the USA are ready to pay to clear their stocks and thus avoid too high costs.
It is noted however that Russia has hinted, this weekend, a resumption of negotiations with OPEC but the urgency is there. As of April 1st, restrictions on black gold production volumes will be lifted and the global surplus could then reach 10.6 million barrels per day in the second quarter, which would further aggravate the situation.