Oil price crashes worldwide, falls below $11

By Syed Sajid Aziz in USA
(Pakistan News & Features Services)

The Pakistani consumers are being robbed by the Oil and Gas Regulatory Authority (OGRA) since the deadly pandemic Coronavirus scare gripped the entire world in January this year. 

On April 20, oil prices showing its worst ever downfall since 1986, dropped to $11 dollar per barrel and yet no respite in days to come. 

The present regime in Pakistan has surprisingly stayed away by extending the price cushion to the end consumers except one-time reduction last month, ripping them off by billions of rupees. 

According to Bloomberg, oil plunged to the lowest level since 1986 as a deadly pandemic ravaging global economies threatens to erase an entire decade of demand growth, slashing thousands of jobs and wiping out hundreds of billions of dollars from company valuations. 

An interesting situation has emerged here in Maryland, USA that people loudly say that oil prices have become lower than mineral water in the market. 

“What the heck consumers would do about lowest oil prices for 34 years as they remained standstill in massive lockdowns here continuing for almost one month,” Syed Wahid Husain, Director, iDrive Driving Institute, remarked. 

Traders fled the May contract ahead of the expiration. Industrial and economic activity is grinding to a halt as governments around the globe extend shutdowns due to the swift spread of the coronavirus. 

Oil has faced its own knock-on effects with a market massively oversupplied and nowhere to put physical barrels. Despite the unprecedented output deal by OPEC and allied members a week ago to curb supply, it’s become too little too late in the face of pandemic lockdowns reducing global crude demand by about a third.

“There is little to prevent the physical market from the further acute downside path over the near term,” Michael Tran, Managing Director of global energy strategy at the RBC Capital Markets, observed.

“Refiners are rejecting barrels at a historic pace and with US storage levels sprinting to the brim, market forces will inflict further pain until either we hit rock bottom, or COVID clears, whichever comes first, but it looks like the former,” he added. 

Since the start of the year, oil prices have fallen by more than 80% or $50 a barrel after the compounding impacts of the coronavirus and a breakdown in the original OPEC agreement. 

With no immediate end in sight and producers around the world continuing to pump, that’s causing a fire-sale among traders who don’t have access to storage. 

There are signs of weakness everywhere. Buyers in Texas are offering as little as $2 a barrel for some oil streams, raising the possibility that producers may soon have to pay to have crude taken off their hands. 

The spread between the nearest two contracts for the U.S. benchmark has fallen to its weakest level on record. In Asia, bankers are increasingly reluctant to give commodity traders the credit to survive as lenders grow ever more fearful about the risk of a catastrophic default.