THE WIDER ANGLE
It’s been a price meltdown that looks set only to worsen for the oil industry as Covid-19 pandemic slams demand. On Monday, the price of West Text Intermediate crude slid below $20 a barrel before clawing back slightly. International benchmark Brent Crude was still hanging in there at $22.76. Global oil giants now believe prices could plunge another 20-25 per cent as demand keeps falling amid lockdowns worldwide aimed at containing the highly contagious coronavirus.
It’s hard to believe oil was $65 a barrel when we entered the new decade just three months ago, climbing back to $70 days later. The Chinese ushered in this period of gut-wrenching change for the oil sector January 23 when it closed roads leading into Hubei province. By end-January, the world began comprehending the grim news emerging from China and it all began to unspool for the industry. Oil slipped below $60 and then went into precipitous free-fall.
In the meantime, there’s been the side-show of the battle between Saudi Arabia and Russia about production levels which has unmoored the sector further. On the surface, it’s appeared Saudi Arabia and Russia, which struck a deal back in 2016 to limit output and keep prices around $70, had fallen out. Many Americans, though, see a conspiracy afoot between their erstwhile Saudi buddies and Russia to reduce prices to levels that would wipe out the US shale industry.
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