Oil prices fall

Internet Desk: Prices fell below zero in the US benchmark West Texas Intermediate (WTI) futures trading for May. This is the first time in history that oil prices have fallen to this level. At one point, the WTI barrel fell to $ 37.63. What is it like to see oil prices go negative? How will this impact India? Is there any benefit to consumers? Let’s see …!
Why the situation?
Lockdown continues in most countries around the world under the influence of Corona. This caused the transport to stagnate. The factories were also closed. This has greatly reduced oil demand. There was no cut in production. Moreover, the price war between Russia and OPEC continues. This increased the production of potatoes. The issue of the price war has been compromised by the agreement between them. They have agreed to reduce production by 9.7 million barrels per day. But, it will come into effect from May 1. This has made a huge difference between demand and supply.
Going negative in price…
Due to the huge discrepancy between production and demand, surplus oil has been moved to storage facilities. As of April 10, storage capacity in the US was 75 percent complete. In another three weeks, the storage centers will be full. A similar situation has occurred around the world. This has resulted in a reduction in the cost of storage. There is no point in buying oil as the storage capacity is exceeding even at the buyers. This meant that the sellers were willing to pay in exchange for getting rid of the excess oil they had. This means that the producer pays for the shipment, in addition to the oil. Prices go negative when this situation arises. However, this situation only applies to May futures. The situation arose when buyers refused to take orders in May after storage capacity was completed in April. The barrel price of futures in June was above $ 20.
What is the situation in India?
When it comes to India .. Strategic oil storage capacity in our country is very low. When such prices fall, other countries’ storage centers are rented out. But now oil reserves have increased in all countries. However, the fall in prices in the international market makes it difficult to transfer the benefit of Onagure directly to consumers. Taxes are more than the petrol and diesel capital of what the consumer pays. So the benefit of a fall in prices may not be that big for us. Moreover, the lockdown has severely damaged central revenue. The oil price fall is likely to be buried in the form of profits. But in the long run, prices are unlikely to fall.
To whom profit?
The aviation industry was the first of them to benefit from the fall in oil prices. However, it is based on the lockdown waiver. The sector will only serve this purpose if it resumes operations in May. It must be said that this is a huge hurdle for airlines already in serious crisis. However, the fall in prices is another indirect warning. There is also a possibility that the full range of airlines may not be able to operate shortly. The oil-based paint industry also benefits. Oil marketing companies can also make profits. But, this depends on the storage capacity of the companies and the cost.
How long is this situation?
This is the first time that prices have fallen. However, this situation is not likely to last long. The price of WTI futures came back positive within hours. This is because Trump has announced that he will move about 75 million barrels of oil to storage facilities. The demand for oil will increase as the lockdown is gradually lifted. Prices are also looming in parallel. However, these fluctuations can be said until the corona pandemic is completely in control! Markets fall for the oil blow…..