Global rates of oil fall
While the amount of people getting Covid test near me rises, it was on 20th April 2020 where lubricant rates fell. Moreover, all of a sudden when the outbreak of Covid-19 cases worldwide led to a complete lockdown of most countries.
What do negative rates mean?
- Oil prices occur when storage globally fills up so fast. This leads to prospects’ contracts falling below zero because supply becomes rapid.
- The storage problem triggered prices to turn negative which occurred for the first time in history.
- This resulted in the rapid production of it which ultimately causes a rapid fall in rates. Production levels generate a much greater stock than demand in 2020.
- Because of this, those who are in this business became eager to pay to unload agreements for it as they became unable to deposit it.
- When the pandemic first hit us worldwide the agency Energy Information Administration already alerted us that the demand globally can fall to approximately 100 million containers each time at the beginning of 2020.
- The Organization of Petroleum Exporting Countries (OPEC) and its partners WTI crude and Brent crude agreed to decrease the stock. To cut to stabilize costs by 10 million barrels a day to calm down the prices.
In mid-March, the United States crude oil dropped 16% whereas the Brent Crude which is an international standard dropped at 14%
Big Companies Affected
West Texas Intermediate (WTI)
- WTI originated from the United States, mainly in landlocked areas like North Dakota, Texas, and Louisiana.
- According to the statistic of West Texas Intermediate on April 20th, 2020, rates dropped from $17.85 to – $37.63. Which is more than a 300% drop which is the highest one-day fall in the history of the US.
- In comparison, the June contractors traded at 70% higher volume. This makes traders neither want to hold this business. And above all, not to take delivery either which causes further pushing down the rates
- Most oil is priced using Brent Crude which originates from fields present in the North Sea and northwest Europe which causes cost-effect transportation lower than west Texas.
- According to the U.S. economy, if the price and demand for it continue to fall day by day. The result may cause lower prices in gasoline too. Which can lead to a rapid drop in United States business investment as well.
- It further states that if prices continue to lower at the pump, it would not be good for the economy of the United States as its economic growth will be slowed by the end of 2020.
Future impact of low oil prices
Having low rates might sound exciting and a good thing to others, but this can also affect the economy. Just as how important getting a Covid test near me is, the rates of this business must also be in a balance.
- It is predicted that rates will remain to trade as long as the economy of the world moves gradually as a cause of the pandemic.
- In conclusion, rates will recover as the budget bounces back. But we have no idea and it is hard to tell how long it will take. It will depend on the decisions we make in the upcoming months of 2020.