The COVID-19 pandemic put a crippling impact on oil-producing countries, as petrol products were the least of what people needed while under lockdown
Following the basic correlation between supply and demand, low demand kept the supply in abundance causing decrease in prices. That ‘s what happened when COVID-19 had spread globally and forced countries to lockdown, whilst halting both international and local travels.
The global health crisis created an energy market in which there was more than enough supply of gasoline and petrol to deliver to consumers who had no use for them.
As a result, the stockpile at oil depots hardly moved since people and all petrol-fueled transport were not moving either. Oil prices started going down when countries went into lockdown mode in mid-March. As the demand for gasoline continued to vanish, the prices of crude oil dropped by as much as 90% in April, coming from a price of $2 per barrel, down to as low as 25 cents.
Oil-Producing Countries Move to Suspend Oil Production and Cut-Off Supplies
In a move to put a balance between oil supply and demand, oil-producing countries Saudi Arabia, the U.S. (Texas) and Russia came to an agreement to first, cut-off oil supply. Subsequently they suspended oil production as well. The problem was more than just demand for oil, but also the potential lack of storage if their oil fields continue pumping crude oil that no airline is buying in large bulks.
Energy Sarah Ladislaw, and the Vice President at the Center for Strategic and International Studies commented:
“The reality is that there’s little that suppliers can achieve by supply cuts, because the destruction caused by the pandemic in terms of demand is just so large.”
Lead analyst Per Magnus Nysveen and a Senior Partner at Rystad Energy said that in cutting half of their oil production, down to 15 million barrels a day, the oil-producing countries are now in a survival mode, awaiting possible recovery by next year.
However, Mr. Ladislaw warns that recovery can only happen if the COVID-19 gets contained and if the people receives vaccine-protection.