The physical market for oil is going down with the increasing effects of coronavirus pandemic on the world economy. The market crash for crude is far from over. This is because of some reasons that are mostly as a result of coronavirus. The current situation is leading to most markets getting crashed. This article highlights the reasons why the oil market crash is far from over.
The decline in consumption linked to travel and manufacturing
Because cars are not on the road, airplanes are not on air, factories are not working and people are no longer going to work, the decline in oil consumption is worst. This means a serious decline in oil demand which is likely to get worse in the coming months, thanks to coronavirus. The pandemic will not allow things to get back yo normal anytime soon.
Global coronavirus cases yet to peak
Since the global coronavirus cases are yet to peak, April is not going to be the only bad month for the oil industry. This is because it is likely to endure other coming months since he pandemic is not likely to end soon. Next month is likely yo be brutal for oil refiners. According to commodities analysts, the war of oil prices will not end anytime soon.
Storage capacity
Even the largest oil refineries in the world are almost running out of space for storing available oil. Right now refineries are scrambling for storage spaces to store gasoline and fuel. This is because refined products are in excess supply.
Because of the dwindling in the available storage, refiners are forced to restrict the supply of oil. This one of the reasons why the physical markets of the oil industry are far from over. The market is about to completely shut down. Because of the increasing shut down in oil refineries, demand for crude oil is also dropping.
The cost of storing oil is increasing day by day making oil availability to decrease.
Since the pandemic is likely to prolong longer than people expect, the demand for oil and most refined products will continue to go down. The pandemic is also causing disruptions to the oil supply chains around the world. Because of this, both oil markets and prices will continue to suffer the impact of coronavirus.
Oil-producing countries at risk
In some countries, oil is their major export. Because of this, oil contributes up to 70% of government revenue. These countries are the most vulnerable to the crashing market in the oil industry. Particularly Nigeria in Africa is at high risk of suffering because of the collapse of the oil industry.
Conclusion
Oil prices are suffering the biggest fall. The physical oil marketing is suffering the impact of coronavirus on the global economy and oil demand. Oil demand has been affected by the fact that most are not working. Cars are not consuming fuel so this is a big drop to the industry. It is time for international financial institutions to come together and help solve the oil price problem.
More:
- Oil Prices Crash Below $20 – Why Crude’s Collapse Is Far from Over
- Why oil prices are crashing and what it means
- Over a barrel: how oil prices dropped below zero
