Dear all, because of the applied confinment measures, all sectors using fossil energy sources (oil and gaz) are stopped, such tranport meansand factories, thus less demand, and consequently prices drop down, which actually seen these months. My Regards

The direct, short-term impact is related to the specificity of the functioning of financial markets as well as commodity futures and commodity markets. The indirect, medium-term impact is determined by the change in the economic growth rate in the real economy, which is a derivative of the development of the SARS-CoV-2 Coronavirus pandemic (causing Covid-19 disease). However, the potential, long-term impact, related to the issue of directions of economic development, can be determined by the issue of the growing importance of implementing the principles of sustainable development in economic processes.

Regards,

Dariusz Prokopowicz

Dear all, because of the applied confinment measures, all sectors using fossil energy sources (oil and gaz) are stopped, such tranport meansand factories, thus less demand, and consequently prices drop down, which actually seen these months. My Regards

Impact of Covid 19 on oil pricing was massive, prices going down to minus territory, however, slowly things would improve and settle down in medium to long term. I think 2021 should be more stable in pricing and consumption.

Due to less demand in my country the prices have gone down but it is only for a while as most countries are beginning to ease covid-19 associated lockdown and restriction measures.

It was quite unbelievable that the price of US oil has turned negative.

A sharp drop in the price of oil due to the interruption of factories and the movement of tourism and transportation between countries.

Thank you everyone for very comprehensive replies.

To add a bit of clarity here, there are two different market dynamics involved - the crude markets and the refined products market (including the petrol and diesel pricing you highlighted as your major concern). Posters above are mixing up the two but they are obviously interrelated so I will go through both briefly.

Crude markets involve:

(i) Spot markets - which have specific different blends (Brent and WTI you may have heard of but there are many others) and physical delivery points (Cushing, Oklahoma, for WTI for example). When you buy on the physical spot market you own the crude and have to store it, transport it and sell it on to refineries yourself.

(ii) Futures markets - where you buy a blend for delivery at a future date. If that dates arrives and you still own that future contract you revert to (i) above.

Spot markets never went negative, only the futures market and only for a very short time as certain dated contracts were about to mature and traders woke up to the fact that they had virtually nowhere left to store it (such was the overproduction of crude at that time). They therefore had to find buyers of those contracts who still had storage capacity available and who squeezed the late comers to have to pay for them to take it off their hands.

Traders are trying to exploit what is called a contango market, which is where the spot price is lower than the futures prices at a certain date. If you have storage, or can charter it, at a lower carrying cost than rise in the futures price then you can make fortunes. This is why you see supertankers (VLCCs) storing oil waiting at key points waiting for right market conditions to sell their crude.

In general refineries make higher margins when crude prices fall - there is negative correlations between their oil products and their crude feedstock price. This is like any factory where if your input costs fall you generally make more profit.

The kicker here is that the markets are being driven by a demand collapse crisis.

Sale prices for gasoline, diesel and aviation fuel (as well as feedstock for the petrochemical industry further downstream in the supply chain) fell even more than crude prices. Those sale prices will be more led by demand local to the refinery - so individual to each region if not each country - in contrast to crude prices which are more regional and globally driven. If the demand for refined products corrects quicker than the crude market reaches a balance, then the refiners will make big money for a while - and pump prices will rise. But in some retail markets (especially in Europe) tax and duty makes up most of the pump price and so the sensitivity to the wholesale market is much reduced (both on the downwards but also the up side).

Ultimately when "tank tops" is reached on all crude or refined product storage then both crude production and refineries have to shut down to match current demand. Despite OPEC+ production cuts there is still global oversupply so we have a way to go until that balance is forced.

This is a very important question we should be asking ourselves as a lot of thing is dependent on the price of crude oil, especially for a crude oil dependent country like Nigeria.

The global restrictions that came with Covid-19 pandemic in combination with the power tussle between heavy producer of black gold has shown humanity to a large extent that crude oil price is not as non-volatile as we all assumed it to be...

This has also stalled different sectors of the global economy that depends on oil as their source of power generation, these industries include manufacturing, avaition, domestic, among many others that are affected directly and indirectly.

China is a very good case study here, they are one of the heavy users of fossil fuel because of their manufacturing might. The fact that China was the first epicenter of the pandemic, goes a long way in determining the price of crude oil as their demand fell drastically during this period.

Definitely, the law of demand and supply is still very much in effect here, and this is one major factor that determines the global market price.

Although, oil producing countries (OPEC and OPEC+) try to mitigate these effects by cutting productions collectively. Howerver, It is evident that this type of solution can only be temporal, as you can only store as much as your capacity. This is one of the reason why the United State WTI Crude went on the negative side several weeks ago.

This pandemic has also exposed the shortfalls of crude oil as an energy source. Many are now looking back towards gas and other underdeveloped source of energy that are more cleaner.

Although, oil prices is looking promising again as countries are begining to ease restrictions and factories are back on operation, the future of oil is something that a lot of countries that still depends on oil solely as major source of income like Nigeria should look deeply into.

The fact is that, crude oil based energy might not phase out completely, but it will surely not be as relevant or prolific as it is today.

Regards.

Olatunbosun Kafisanwo