Since the beginning of the Coronavirus pandemic, there has been a loss of 1/3rd global demand – more than 30 million barrels per day (BPD).
The virus instilled a level of uncertainty for oil traders, but the catalyst for the initial drop in price can be attributed to the escalating price war between Russia and Saudi for market share, eventually leading Saudi to flood the market with oil.
This oversupply dragged WTI prices below $20 a barrel at the end of March. Thus, increasing divergence in power politics from major producers created an initial frenzy in the oil market and an increasingly unsettling omen for investors.
In macroeconomic terms, Coronavirus has wiped out approximately 25 million jobs in the US, taking out all the jobs created since the 2003 and 2008 recessions. Central Banks globally have cut interest rates, restarted Quantitative Easing and provided other fiscal stimuli to try and keep the economy afloat.
The longer-term consequences of Coronavirus are still unknown. In the meantime, a deflationary ripple effect across the global economy can be seen, as Central Banks attempt to sustain economies’ survival as the Coronavirus pandemic continues to debilitate businesses and paralyzes transportation worldwide.
“The jump in the price of oil to the concrete promise of a vacino must not make us forget the industrial and employment crisis that will hit us in 2021.”
Oil’s gains weren’t necessarily all about the vaccine, however, with analysts noting remarks by Saudi Arabia’s energy minister that signaled openness to tweaking the agreement between the Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, on production cuts.