Oil traded at a negative
price on a one-month West Texas Intermediate futures contract, but it didn't
for successive months' futures contracts.
Last week, the quantity of
oil in the global supply pipeline was so high that some traders were willing to
pay anyone who promised on April 20 to lift oil a month later. Oil traded at a
negative price on a one-month West Texas Intermediate (WTI) futures contract,
but it didn’t for successive months’ futures contracts
But the blip nevertheless
confirmed the oil shock that will play out in the near future due to lower
demand post-Covid-19
menace. The world is known to oil shocks, and India bought oil at $16 on April
21, the lowest in almost five decades, due to depressed benchmark prices.
The magnitude of excess supply
is visible in two key indicators. Developed countries have about 80 days of oil
stocked with them, up 33 per cent from the normal of two months. Second, a
whopping 100 million barrels of oil was present in the sea and ports
(in-transit) at the end of March 2020, 50 per cent more than what it was six
months ago, and possibly the highest ever.
shows the reason: Global
body International Energy Agency has predicted that oil demand will fall by a
staggering 25 per cent from 100 mb/day to 76 mb/day by April-June 2020.
The demand situation in
India was visible in March data. The consumption of airline fuel, diesel, and
petrol plummeted, and will be followed by a stronger plunge in April because of
the lockdown. Though low oil
prices generally give a revenue windfall to the Union government, the
falling consumption is likely to dent fuel tax revenues for both the Centre and
states
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