Global prices are close to the 2015-2017 average, closing the year at $ 51 a barrel. There have been serious fluctuations throughout 2020. In April, US crude oil took a deep dive into the negative zone. The cutthroat price war between oil giants Saudi Arabia and Russia, with the impact of the Covid-19 outbreak, Brent fell below $ 20 per barrel.
The epidemic has destroyed worldwide fuel demand. The oil market has spent the rest of 2020 struggling with these shocking demand drops and the resulting oversupply. After the shocking surprise, an atmosphere of peace arose. For the time being, a satisfactory balance has been achieved thanks to the decisions and practices taken by the oil producers who dominate the world to balance supply and demand.
Markets have been turbulent and erratic with prolonged effects for 12 months. The Cboe Crude Oil ETF Volatility Index surged to a record 517.19 in April. The index has since dropped to around 40, but that is still about 60% higher than this time a year ago, Refinitiv Eikon data shows.
Despite all efforts, there are new lockdowns to treat the virus and the gradual introduction of vaccines will continue to cut demand in the next year and perhaps beyond. In addition, as countries try to limit emissions to slow climate change, fossil fuel demand for years to come may remain soft even after the epidemic.
As coronavirus cases spread, governments imposed lockdowns, keeping residents at home and away from travel.
The Energy Information Administration said that world oil and liquid fuel production fell from 100.61 million barrels in 2019 to 94.25 million barrels per day in 2020, and production is expected to grow to only 97.42 million barrels next year. He said that world crude and liquid fuel consumption fell by 9% from 101.2 million barrels in 2019 to 92.4 million barrels per year.
This situation, which states that 1.5 million barrels of processing capacity is withdrawn from the market per day, poses a threat to refineries. Worldwide crude oil distillation capacity is expected to continue to increase, but the reduced demand for gasoline, diesel and other fuels and weak margins have prompted refineries to shut down or reduce production.
The next few months are likely to be volatile as investors consider producers’ compromises and practices in oil supply, including the Organization of Petroleum Exporting Countries (OPEC) and its allies.
