The global economy is reeling from the effects of the coronavirus pandemic. For the first time in history, the price of US crude oil turned negative as demand wiped out amid a shortage glut and a plunging economy.
The West Texas Intermediate (WTI), the US benchmark crude oil, crashed a jaw-dropping 300 percent, deep down in the negative territory and settling at -$1.15 per barrel. These prices are determined on a technicality, based on an oil futures contract, and storage prices will be filled to the brim next month.
Many are even unsure what it means to have oil prices turn negative. The price signal that traders are paying to have the oil taken away from them, and the market is signaling that storage is filing up and more production is not needed. The prices have rebounded but the uncertainty remains as the pandemic has brought global economy, transport and facing to a halt.
Things were different in Europe and Asia as the Brent crude, the international benchmark, retained control and was down just 10% and trading at $22.67 per barrel. Despite the pessimism of President Trump, the US will remain under lockdown until May, leading to a drop in demand. This isn’t surprising as airlines are grounded and people are driving much less for work and leisure.
US President Trump has downplayed the oil glut despite the fact that oil markets have been ravaged this year not just by the pandemic but also the price war between Saudi Arabia and Russia. The tug-of-war between both countries and the refusal to cut down supply will affect Middle Eastern economies. Oil-dependent countries such as Saudi Arabia and UAE will be the worst affected amid the crisis.
Trump is instead pushing forward his own rhetoric amid the pandemic and has now decided to stop all US immigration. No details or the parameters have provided but he has invoked the ‘invisible enemy’ as an excuse to implement the same controversial policies during his presidential term.
The coronavirus is altering the world we are living in, shaking up geopolitics and leveling the field with billionaires. Richard Branson, the owner of Virgin Atlantic, offered his island as collateral to secure a bailout loan. As the UN chief, the world will not be the same until we secure a vaccine.
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