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OIL PRODUCTION

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With the rising global spread of the Corona Virus beyond Asian countries, countermeasures have been taken to contain the disease. The restricted movement and travel bans have been enforced. However, this has had a negative effect on the oil industry with low demand for oil production compared to its oil supply. The result has had a worldwide impact on the oil industries, experiencing significant losses.  This is toppled by the uncertainty of the global recession with the cure of the disease still unknown. In the long run, the supply of oil may spiral, leading to inflation with low production.

In June 2020, the USA oil price dropped to 18 to $20.43 a barrel. Brent also recorded significant losses by the reduction of oil prices to 8.9 to 25.57 per barrel. The loss exacerbated in May to a loss that could only be compared with the 1983’s. Despite the unanimous agreement between leading petroleum exporting countries and the Group of Twenty nations to reduce the production of oil, significant losses are still experienced. The low demand for oil compared to the high rate of production has to lead most companies to hoard oil. Most traders are therefore stumbling to hoard their oil at Cushing and Okla, major USA crude oil traders with the hope of getting better returns in the future.

The low demand for oil has led to slow production, and the oil companies relieving some of its workers. Discharging workers, in the long run, may have a long-term effect on the rise in prices due to the shortage of oils production. The oil industry is also threatened by the stock market’s reaction to the costs of oil. Some investors may opt to reinvest elsewhere following the uncertainty in the losses experienced, which may cripple the oil and energy industry.

In conclusion, the effect of the Coronavirus has harmed the oil industry. With colossal amounts of losses experienced from the low demand for oil. The energy industry needs to brace itself for the possible decline in investors in the stock market and the rising losses which are unforeseen.

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