The price of oil has plumetted beyond imagination, oil tanks and reserves around the world are almost full, this is due to the non existence of the demand for them. The price of oil in the U.S has dropped to a level where its now $30 per barrel or less, this is the first time ever, for the price of oil to become negative.
As the novel COVID-19 continues to endure, its tentacles of economic crises continues to ravage. As we have noticed the demand for oil is still dropping. At the early days of 2020, Brent crude sold at about $60 per barrel, but as at Thursday, it dropped to $24 per barrel. The world as it is experiencing an oil glut market, with over 90 million barrels of crude oil produced daily with no consumers.
An energy analyst at an oil producing firm, by name Omeiza Makoju, ACCA, spoke with Nairametrics explaining how cheap crude oil has become. He explained saying:
“As at the close of global markets on 29/04/2020, WTI and Brent prices per barrel were $15 and $22 respectively (Average volume of an oil barrel is 158.987 litres). Applying N360/$, which is our current exchange rate according to the “adjustment of price” by the CBN, the price of WTI and Brent per litre in Naira is N36 and N51 respectively.
“This intrestingly shows that the current price of a litre of Brent is the same as the average price of a litre of bottled water in Nigeria. This is just a coincidence and does not answer the question. From a global perspective, the major cause of dwindling oil prices is the sharp fall in global demand. The sharp fall is as a result of the double whammy effect of the COVID-19 pandemic and the Saudi and Russian oil price war currently ravaging world economies.
The bigger problem is the pandemic which has led to a shutdown of global economies and which in turn has led to a drastic reduction in the consumption of crude oil. The biggest consumers have had to shut down their industries and also have to contend with oil glut/storage difficulties offshore and onshore”.
Oil analysts predict the price of oil is bound to keep falling until a vaccine for the coronavirus is found. The presence of a formidable vaccine will tilt the battle in our favour, and help in bringing national activities back to normalcy, causing countries economies to rise from the ashes.