What is the impact of lower US oil prices on the VG 30 bitumen market?
In an unprecedented event, the price of West Texas Intermediate crude oil
for delivery in futures traded negative,
with experts saying that the best solution was to reduce oil production. According to a verified news agency,
the zero storage capacity of most buyers and producers is one of the
main reasons for this unprecedented fall when the demand for oil due
to the outbreak of the corona and the closure of a large part of businesses
has reached one of the lowest levels in a decade. “In the short term,
there is very little chance of preventing further price declines as refineries
refuse to order and accept new oil,” said Michel Tran,
director of energy at RBC Capital Markets.VG 30 bitumen
Since the beginning of this year, oil prices have been largely declining,
and even the agreement of major oil-exporting countries called OPEC Plus
could not change this trend. However, oil prices are unlikely to last
long at a negative level as both oil production is declining rapidly and
demand for purchases is likely to increase gradually following the
reduction of quarantine restrictions. In the United States alone,
oil companies have reduced their extraction capacity by 13 percent in one week.
An energy expert has uttered: “This price change happened in the
US futures market, but the developments in this market in the
physical market will also have an impact because the impact of these two
markets is mutual.” “Demand has become very weak and the possibility of
storing oil will be very costly because of the accumulation of reserves,
and this is a historic event,” he said. “Maintaining oil has a very high cost.
America has grown dramatically.VG 30 bitumen
“In fact, the cost of maintaining oil has exceeded the price of oil, and this has
led some countries to decide to reduce production,” he said, noting that operating costs have risen unprecedentedly from US oil prices. According to his declaration,
some of these countries, which were to reduce production,
announced that they would not wait for the deadline and would reduce production from now on. In fact, they welcomed this issue 10 days earlier.
Respectively, he said that this issue can help improve the situation to
some extent, adding: “Meanwhile, there are doubts about the rate of
production reduction. Some even believe that a reduction of 19 million
barrels is not enough at all and the market needs a reduction of
30 million barrels.” And this rate of production reduction, if implemented,
can only partially improve the current situation.