The future doesn't seem so bright for Oil

The future doesn't seem so bright for Oil

The Oil demand is expected to drop even more as the world is on lockdown

Covid-19 keeps on making victims in the market. Lockdowns and strict traffic measures threw Oil under the bus


As an example of how Coronavirus pandemic affected the markets, we can take the case of Lufthansa, the biggest airline in Europe. It is planning to ground 700 out of 763 aircraft, making the fight schedule reach a low last seen in 1955.

OPEC+ failed to reach common groundat this month’s meeting. The supply pact between OPEC and its allies fell apart, urging the organization to take measures. This started after Russia refused to join the other OPEC+ members in making deeper cuts to Oil production to support prices.

The price war between Saudi Arabia and Russia made the price drop to the lowest level in 17 years. In March alone, the quote was cut by half, close to $25 per barrel.

To keep the market afloat, Saudi Arabia had planned to raise the production and supply 12.3 Million bpd of Oil starting this April.

But even if the demand comes back to normal levels, there is a possibility that 2020’s Oil can suffer the most significant decline since the mid-1960s. Until now, the biggest contraction was in 1980, when the second oil crisis happened, with 2.6 million bpd.

Fatih Birol, President of International Energy Agency, believes that the global Oil demand will fall by 20% in the coming months.

Globally, some of the largest Oil exporters and importers keep suffering, not only because the pricewar, but also due of the travelling restrictions imposed. For example, Oil, which is one of Canada's essential exports, settled at $22.60 a barrel as restrictions on travel cut fuel demand. USD/CAD bounced off the lows, with 0.40% gains, as Bank of Canada cut the interest rate to 0.25%. This is the lowest it has been in more than a decade.

Maybe a change is in sight for the Russian Ruble. After it dropped because the country's central bank cut the interest rates to 6%, the fall of Oil prices made USD/RUB moved higher.

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Sources: yahoo.com, ft.com, marketwatch.com, reuters.com, middleeasteye.net

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Users/readers should not rely solely on the information presented herewith and should do their own research/analysis by also reading the actual underlying research. The content herewith is generic and does not take into consideration individual personal circumstances, investment experience or current financial situation.

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