Global Oil Forecasts
Global Oil Forecasts
First off, let's recap the cause of the issue at hand, some experts would say that there are two crucial players in the game right now: low demand + low storage capacity.
As a safety measure to help reduce the spread of the virus, many businesses in the transportation industry have restricted and/or paused all travel, including flight cancellations, suspension of bus routes, and subways. Transportation Security Administration (TSA) reported that checkpoints in the U.S. have fallen to around 5% of their 2019 level, due to the travel restrictions.
Not only has overall travel dropped, but as a result of the U.S. shutdowns across the majority of the nation, everyday transportation, including commuting, has fallen. This includes all commercial travel that requires motor fuel. Even though gas prices today are at an all-time low, people aren't filling up their gas tanks, because they have nowhere to go! The low activity in travel and transportation, along with the low demand for oil, has caused a new 2020 oil glut or surplus of crude oil.
According to Forbes, the price of U.S. oil has turned negative for the first time in history, which can be extremely problematic for oil producers. Stuart Porter, a manager at Adler Tank Rentals, claims, "the industry is scrambling to source viable storage options." Because storage options are becoming limited by the day, some oil producers are worried their storage capacity will ultimately run out, so they are paying buyers to take the excess oil off their hands.
Some can look at it as a bargain, purchasing oil at such a low price now and saving it for later. However, it's the storage part; that's the issue.
This can be an opportunity for storage facilities to offer storage for these oil savers, and many are working hard to open up units. Some are also having to think of creative new solutions for the lack of storage. For example, Caliche Development Partners is planning to open a newly completed 3-million-barrel underground salt-cavern for crude oil or gasoline. But oil marketers warn that buyers better hurry, as it's not cheap, storing crude oil could cost up to $20 a day, per tank!
What’s Next For The Petroleum Industry
In January of 2020, the oil price was about $64/bbl (per barrel) and is currently at $33.92/bbl. According to The World Bank, oil prices are expected to average to $35/bbl, before recovering up to $42/bbl by 2021. Experts anticipate prices to rise by 2021; once mitigation measures lessen, the demand should rise back up.
Global Economy Forecast
International Monetary Fund’s chief economist Gita Gopinath said: “The magnitude and speed of collapse in activity that has followed is unlike anything experienced in our lifetimes, it is very likely that this year the global economy will experience its worst recession since the Great Depression.”
As Gopinath predicts the worst, World Bank, (in a more hopeful manner), wrote: “It is still within the global community’s power to avert the pandemic’s most dire potential outcomes—but we must act decisively now to contain the harm and lay the foundation for a robust recovery.”