Oil prices drop to 21-year low as demand and storage crises persist

There appears to be no respite in sight for oil producers, as the volatility and continuous price slump in the global oil market continue. Checks by Nairametrics confirmed that crude oil prices extended its slide, crashing to its lowest in over two decades due to a terrible combination of very low global demands and concerns that global storage facilities are rapidly running out.

The present circumstances in the global oil market indicate that the output cut deal between OPEC+ and other top oil-producing countries has proven insufficient to take care of declining oil demand.

It should be noted that the June delivery for WTI declined to $23.69 per barrel, while that for Brent crude declined to $27.83 per barrel. According to a report by Bloomberg, an analyst, David lennox, said, “The output cut that we’ve seen, or supposed to see coming, isn’t sufficient to cover the 25 million to 30 million barrels of daily demand that’s being destroyed by covid-19.”

The oil price crash is still sending shockwaves throughout the industry, even as oil majors have begun reviewing all their existing contracts with their vendors and contractors downward. They had to slash their expenditure across the board.

The negative impact of volatility of the market has seen Exxon Mobil, which was the most valuable company in US as of 2013, reduce in worth to just about 13% as much as Apple and Microsoft. A recent report shows that streaming giant, Netflix is now more valuable than the firm.

In the meantime, there are indications that the International Energy Agency (IEA) is considering the option of paying producers to keep crude oil in the ground. This is expected to take care of the problem of scarce storage facilities.

Nigeria is not an exception to the global impact of the coronavirus outbreak, low oil demand and inventory of unsold cargoes as had been previously reported.

The oil industry regulator, Department of Petroleum Resources, had tightened offshore oil rules after some oil vessel workers tested positive to the coronavirus disease. They directed the oil and gas companies to reduce their offshore workforce and introduce a 28 day staff rotation as part of the measures to contain the spread of the disease.

As part of the pressure of trying to curb the spread of the pandemic, the Rivers State Government, arrested 22 Exxon Mobil staff for violating its lockdown directive by entering the state without approval from the state. They were later released following threat by workers union to down tools and shut down oil facilities nationwide.

The oil market crises is also affecting the performance of some publicly quoted oil exploration and production firms. Seplat Petroleum Development Company, has seen its shareprice on the Nigerian Stock Exchange plunge from about N605 per share in March to about N492 as at today.

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