'..we may have just witnessed the permanent peak in oil demand. Greater efficiency, more EVs and also permanent changes in behavior stemming from the pandemic could add up to a peak in consumption.''Oil prices crashed through zero, closing out the day at -$37 per barrel, an unprecedented meltdown.
There are mitigating circumstances to these insane numbers. The prices for WTI reflect the contract for May, which expires this week. The collapse is a reflection of traders abandoning the May contract, and moving on to June. The thinly-traded May contract loses some relevance, and analysts say that the June contract – trading at $20 per barrel as of Monday – now becomes the important number to watch.
Nevertheless, it is hard to ignore the historic numbers flashing across the screen. As futures contracts expire, they tend to converge with the realities of the physical market. Prices went negative because the physical market in Oklahoma and Texas is so overwhelmed. OPEC+ did agree to historic production cuts, but not for April. In any event, the cuts pale in comparison to the decline in demand. But taken together, the effects of the price war on the supply side are colliding against the depths of demand destruction at the same time.
..
Those staggering figures may not be quite as large in May and beyond, but there is little chance that global demand bounces back to 100 mb/d anytime soon, if ever. Mark Lewis, global head of sustainability research at BNP Paribas Asset Management, argues in the FT that we may have just witnessed the permanent peak in oil demand. Greater efficiency, more EVs and also permanent changes in behavior stemming from the pandemic could add up to a peak in consumption.
- Oilprice,
What’s Next For Oil As Prices Go Negative? April 20, 2020
Context('..in the $10 to $20 barrel range..') - 'Oil Prices Crash 25%..' - '..anticipating barrel prices as low as $20 within the year.''..wood burning is the single largest source of hazardous particle pollution during winter, creating even more particle pollution than vehicles and industry.'(BBC) - '..a possible link between high levels of air pollution and Covid-19 deaths in northern Italy.'