This archive report was first published on 5 May 2020.
As the world grapples with the Covid-19 pandemic, the oil industry is facing an unprecedented crisis. The sector experienced a major collapse of oil demands in April, leading to unplanned oil production cut-backs and a steep drop in Brent crude oil prices to below $30 per barrel, levels last seen in the late 1990s.
According to experts, oil demands and prices can only revive when ample progress is made across the world to contain the Coronavirus pandemic, which prompted socio-economic shutdowns worldwide.
As countries begin to roll back virus-related restrictions, the timing and quantum of oil demand and price recovery will remain uncertain. The revival of international air travel, which constitutes a major fraction of petroleum demand, will be a key indicator of oil demand recovery.
Meanwhile, oil producing countries and companies are experiencing reduced oil export demands and revenues, with some countries facing a major nightmare in financing national budgets. Oil companies are cutting back on capex, operating costs, and dividends for survival, with lower-tier operators finding it difficult to stay afloat.
A diplomatic crisis is brewing between the US and Saudi Arabia, with 43 Saudi Arabian crude oil tankers queuing to discharge oil in US facilities at a time when the US has no ullage for their own production.
President Trump is expected to play his executive 'trump card' to protect US oil interests, either by imposing hefty tariffs on Saudi oil or threatening the Saudis with military support withdrawal.
Ultimately, the solution to the oil industry's revival lies in the discovery of effective vaccines that will permit unrestricted human activities to sustain economic recovery.
