*Editor’s Note – April 20, 2020
Since this article was originally published, WTI crude oil prices crashed again on April 20, 2020 to below $3 a barrel. Brent crude oil also traded 6.2% at $26.35/Bbl, in line with our previous forecasts of prices holding at sub-$40s/Bbl.
Practice Leader for Global Economics and Scenarios, Ryan Connelly provides timely insights below for multinational executives to manage the current volatile environment:
The last trading day for the current WTI oil futures contract, for delivery in early May, is April 21. Holding an oil future after tomorrow means, in most cases, the owner wants to accept physical delivery of crude. But amid the collapse in demand for oil, inventories remain high at refineries, who are also in cash savings mode. There are simply no buyers at the moment for a difficult-to-store product.
The combination of the COVID-19 outbreak and the recent oil pricing war between Saudi Arabia and Russia has created business disruptions worldwide, most recently with a stock market crash following the plunge in oil prices after Saudi Arabia slashed crude prices over the weekend. Previously agreed upon OPEC (Organization of the Petroleum Exporting Countries) production cuts are set to expire at the end of March, and with that Saudi Arabia can potentially pump as much oil as it wants – therefore potentially plummeting oil prices even further.
Practice Leader for Global Economics and Scenarios, Ryan Connelly provides his initial insights on the business impacts for the remainder of 2020 below.
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