The coronavirus pandemic has led to a severe economic crisis with a drop in global energy demand. In March, the World Health Organization (WHO) declared the spread of a new coronavirus infection a pandemic, which almost immediately led to a massive closure of borders between countries and the cessation of air travel. This inevitably affected oil prices.
The average price of a barrel of Russian Urals crude oil in April 2020 reached a local minimum of $ 16.26, while exactly the year before, in April 2019, a barrel price peak of $ 71.54 was recorded. The cost of futures for physical delivery oil became negative at all. That is, oil sellers even paid extra to buyers for agreeing to accept unnecessary excess oil.
As a result, oil consumption decreased by an average of 9 million barrels. The total demand for black gold was estimated by various experts at 90-93 million barrels—per day.
The decline in demand is primarily due to air travel cessation and a reduction in traffic flows. Transport accounts for more than half of the world’s oil consumption. About 20% of them are air transport. Air carriers themselves estimate their losses due to the coronavirus crisis and its consequences at almost $ 1 trillion.
A large-scale collapse of oil prices, as well as a drop in demand for hydrocarbons, led to the revision of the terms of the agreement of several oil-producing states included in the OPEC + deal. So, in the crisis April, the OPEC + countries decided to reduce oil production amid a sharp drop in global demand amid the coronavirus pandemic.
Under the terms of the agreement, production by OPEC + countries was reduced by 9.7 million barrels compared to the October 2018 level. Per day (by 23%) in May-June. Russia and Saudi Arabia, under the agreement, decreased production by 11 million barrels. Per day. In June, the deal was extended without renegotiating the terms.
The restriction supported the quotes of black gold. In July, prices rose to about $ 40. In August, the parties decided on a partial recovery of production, increasing production by 2 million barrels. Per day.
In December, the countries participating in the agreement decided to further increase from the beginning of next year – by another 500 thousand barrels. Per day. The parties to the transaction believe that this is facilitated by the current stabilization of oil prices at the level of $ 47-49 per barrel. Oil exports from Russia in January-October 2020 decreased by 11% compared to the same period last year – to 199.86 million tons. At the same time, in monetary terms, according to the Federal Customs Service, it fell by 41.1%, to $ 60.37 billion. This is the largest drop in oil export revenues in modern history.