We start an in-depth discussion with experts from around the world.
There was a worldwide shock when U.S. oil contracts for May dropped to minus 38 dollars
a barrel this week,... crashing into negative territory for the first time in history.
While demand has dried up as the COVID-19 pandemic paralyzes economies and keeps people
at home,... excess supply is in limbo not helped by an intense price war between Russia
and Saudi Arabia. What do these ultra-low oil prices mean for
producers and what does it tell us about the world economy as it grapples with the coronavirus?
Today, we're joined by Dr. Graham Ong-Webb who joins us from Singapore's Nanyang University
and Tony NASH, CEO and Founder of Complete Intelligence.
Dr. Ong-Webb: First, what caused U.S. oil prices to fall to such historically low levels?
Mr. Nash: All eyes are now on futures contracts for June. But there hasn’t been much cause
for optimism amid the pandemic and as forecasts for a swift economic recovery get dimmer and
dimmer. Some analysts are saying oil could fall to minus 100 dollars per barrel for June.
What's your take? Mr. Nash : Brent crude has been faring better
than U.S. oil, but it’s also taken a hit amid a supply glut worsened by the price war
between Russia and Saudi Arabia. When demand has plunged by as much as 30% globally as
much as 70 percent in countries like India. Could Brent also flip negative?
Dr. Ong-Webb: Well, OPEC is due to start cutting supply by 9.7 million barrels per day reducing
about 10% of global supply from May 1st. That’s a historic cut, but is it enough?
Do you think they'll have to cut even more? Mr. Nash: How will this affect hundreds of
energy companies in the U.S., as well as the thousands of people employed in the US oil
and gas sector? What will
the industry look like after the pandemic is over?
Dr. Ong-Webb: The oil crisis in the mid 1980s preceded the fall of the Soviet Union. If
global oil prices remain around the 20 dollar threshold, which economies will be in hot
water? Dr. Ong-Webb: Will this slow the pace of the
global recovery from the COVID-19 recession? To both: It’s clear the historically low
prices will affect all global players but it seems Saudi Arabia and Russia are vying
for oil supremacy. If that’s the case, has it worked? And over the coming months, who
has the biggest chance of emerging victorious? To Mr. Nash: It seems even oil companies that
survive face an existential crisis. Energy was the worst performing sector on the S&P
500 stock index last year. What fundamental challenges does the industry face?
That's all we have time
for today but it's
been
a great discussion. Thank you
for joining the program today Tony NASH, CEO and Founder of Complete Intelligence, and
Graham Ong-Webb of Singapore's Nanyang Technological University.