The oil market is one of the pivotal aspects of the economy. Since the outbreak of the Coronavirus, the oil giant is facing hardships in its management. OPEC has now recorded another fall in global oil prices despite the agreement to cut production. Officials are now worried about when the current war on oil prices will end.
The price of black gold continues to decline despite the OPEC agreement. Following the latest reports, OPEC agreed to reduce global production to ten million barrels in a day. However, some of its member nations are not respecting the decision. Saudi Arabia is one of the countries that have not yet complied with the rule.
Democratic of Congo oil production
Recently, the Democratic Republic of Congo signed a twenty-year-old deal with OPEC.
According to the reports, the current oil crisis does not seem to affect oil production in Congo. The country signed an oil production sharing contract, which includes the exploitation of gaseous hydrocarbons.
Congo speculates to yield extensively from the signed deal. According to a survey, the recent agreement can deliver more than five hundred million barrels of oil in a period of twenty-five years.
Oil price war
Analysts predict another ten percent decline in prices if the global oil market proceeds with a price war. The inevitable is a massive blow to the United States government oils sector and companies facing bankruptcies and forced mergers. Investors’ mistrust has called for overspending for the industries.
For instance, Russia is likely to see a severe decline in demand. The first quarter shows that the world market is 3.9 million barrels per day. According to statistics, this is low compared to the first quarter of last year. Similarly, Brent crude recorded $31 per barrel and could fall to $20s before catching up. As of April 2019, Brent was already well of the high with $75.60 per barrel.
Saudi Arabia suspends production as analysts expect oil demand to decline. Chinese market dropped by 20% as well in the last few months. Trade is now falling all around the world. Many are at home because of the COVID-19 outbreak.
The oil sprawl is an indication of what to come
As COVID-19 keep workers at home and planes on the ground, demand for oil as fallen severely compared to history. According to the survey, last month, oil prices fell by more than half, leaving industries wobbled. As a result, OPEC and its allies speculate about cutting production and restraining output for two years.
Private firms, state-owned companies that rely on energy exports, are extensively hit by the oil crisis. They have to restructure and brace themselves for an extended period of pain as a result of the current situation. Similarly, private firms outside the OPEC alliance will have to reduce output. No one knows for sure when demand will pick up.
Conclusion
Now a more profound adjustment awaits, and volatility will probably dampen investors’ craving for new projects. Oil firms are slashing output rates as demand is running low. Unfortunately, pricey oil is left underground for an unknown period. Big oil exporters, including Saudi Arabia, will have to cut public spending. Besides, a peak in demand can still be years to come. Now, Oil producers should see the Coronavirus pandemic for what it is and a sign of what to come.
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