Why Oil Price Decreased?

AM:10:36:22/03/2020


Translation Unit
Academic Board of the Center

The world faced "shocking economic earthquake” on March 9, by decreasing oil price into a mount which since 1991 after Iraq invaded Kwait that has not happened to the oil price.

 

Oil price due to outbreak of Coronavirus decreased to merely 35.45 USD per barrel on March 9.

 

In February 2014 per crude oil barrel was about 110 USD, however at present the price reduced to 25 USD only.

 

For a long period the oil price remained over 100 USD which started since 2011, but this may not loner maintain because of in eighties the oil price was 20 USD per barrel.

 

Why Oil price reduced?

 

Saudi Arabia is the main global oil products, since last two weeks Saudi Started the price fights. This Saudi steps comes after failed with Russia and his allies in OPEC.

 

In 2016 after oil price reduced to 30 USD per barrel, Saudi and Russia united to make what is called "OPEC Allies” both states daily produced 2.1 million barrels and Saudi desires to increase for 3.6 million barrels until 2020, but Vladimir Putin felt anxiety to make an environment which lead to increase America oil, therefore he refused the plan. In reaction Russian energy minister in a statement declared that "every country produces as much as can”.

 

Why Saudi erupted price fight?

 

Confrontations on the best way to manage world oil market in the last meeting between Russia and OPEC in Vienna has maintained, after Russia declaredrepudiated his allies, Saudi afraid of Russia to get away from the decision. Therefore, Saudi decided to reduce its shares through decreasing the price. Some believe that Saudi has planned to produce 10 million barrel per days.

 

What is the relation of Covid-19 with these crises?

 

Generally, outbreak of Covid-19 has direct impacts on energy needs around the world, especially China which now is the prominent oil crude buyer in the world, China buy 10 million barrel per days. However, massive enterprises and world air flights have stopped due to outbreak Covid-19 from Wuhan- China.

 

There is no doubt that in these events, the main producers of oil are main loser. Gulf States producers spend only (2-6) USD per barrel, especially (Saudi, Kwait and Emirate). Meanwhile, States who merely depend on oil as revenue of their states have involved in problems of conflicts over years such as (Iraq, Iran, Libya and Venezuela). This also has impacts on US as well.

 

Does it has on users?

The great oil buyers as China, India and German are take benefits from the decrease of oil prices, in the same time the users generally get along with the decreasing of oil price particularly America.



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