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MARLO Blog

Oil Price Collapse

The global economy, which is reeling under the coronavirus instigated lockdown across the world, received a significant jolt on 20th April when oil prices collapsed to a negative value. The cost of West Texas crude fell to -37.63 per barrel, and sellers were pushing to sell their existing May futures contracts before the deadline.

Bloodbath in the oil markets 

This unprecedented situation of the oil price collapse is due to a gut in supply combined with the slump in the global economy created by the COVID 19 outbreak. All this set the stage for the most significant drop in oil demand in the past 25 years. The oil price collapse accelerated the real fear that the world economy might witness the most significant downturn since the great depression.

Analysts gave early warnings that the demand for oil would be at its lowest since 1995 due to the COVID 19 outbreak. However, oil producers continued pushing crude oil into the market at record levels without paying heed. A few months back, the US government brokered a deal between OPEC and the oil-producing countries to reduce oil production. But even that couldn't prevent the price from crashing.

 

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