{"id":51900,"date":"2020-03-22T18:56:46","date_gmt":"2020-03-22T23:56:46","guid":{"rendered":"https:\/\/olduvai.ca\/?p=51900"},"modified":"2020-03-22T18:56:50","modified_gmt":"2020-03-22T23:56:50","slug":"what-happens-if-oil-prices-go-negative","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=51900","title":{"rendered":"What Happens If Oil Prices Go Negative?"},"content":{"rendered":"\n<h3 class=\"wp-block-heading\"><a href=\"https:\/\/oilprice.com\/Energy\/Energy-General\/What-Happens-If-Oil-Prices-Go-Negative.html\">What Happens If Oil Prices Go Negative?<\/a><\/h3>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/d32r1sh890xpii.cloudfront.net\/article\/718x300\/2020-03-20_aynxgyplmz.jpg\" alt=\"Oil Price War\"\/><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">Various reports hit the news feeds today quoting a deliberately headline-grabbing statement by Paul Sankey, managing director at Mizuho Securities, in which he is reported as saying, \u201cOil prices can go negative.\u201d&nbsp;That is, they could as a combination of Saudi Arabia (and Russia) flooding the market with increased oil and the market running headlong into COVID-19-induced curtailment of activity that is suppressing consumption, which combined will create the perfect storm of excess supply.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">In reality, inventory levels are already rising.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">CNN quotes Sankey, who said&nbsp;<a href=\"https:\/\/www.ccn.com\/this-is-how-oil-prices-can-crash-below-0-yes-really\/\" target=\"_blank\" rel=\"noreferrer noopener\">global oil demand<\/a>&nbsp;is only around 100 million barrels per day.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">However, the economic fallout from the coronavirus pandemic could crash demand by up to 20 percent.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This would create a 20 million barrel-per-day surplus of oil in the market that would rapidly exceed storage capacity, forcing oil producers to pay customers to buy the commodity \u2013 hence, in effect, negative oil prices.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The American government plans to purchase a total of 77 million barrels of oil starting within weeks the article states, but according to Sankey, this can only be done at a rate of 2 million barrels per day, leaving a massive excess that will be looking for a home.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Brent oil prices have already fallen to the lowest level for 17 years. The consequences for the U.S. oil industry if a coronavirus-induced recession drives down demand could be catastrophic.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">West Texas Intermediate crude (WTI) collapsed by a staggering 19.2 percent to $22 while the Mexican Basket is down 22.4 percent.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For a short while, hedges will protect producers and they will continue to pump oil. While that will protect producers for a while, it encourages counter-cyclical practices; producers should be cutting back but instead will probably continue to pump and ship into store.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u2026click on the above link to read the rest of the article\u2026<\/p>\n","protected":false},"excerpt":{"rendered":"<p>What Happens If Oil Prices Go Negative? Various reports hit the news feeds today quoting a deliberately headline-grabbing statement by Paul Sankey, managing director at Mizuho Securities, in which he is reported as saying, \u201cOil prices can go negative.\u201d&nbsp;That is, they could as a combination of Saudi Arabia (and Russia) flooding the market with increased [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2,3],"tags":[29011,589,592,23083,596,17510],"class_list":["post-51900","post","type-post","status-publish","format-standard","hentry","category-economics","category-energy-2","tag-covid-19","tag-oil-demand","tag-oil-price","tag-oil-price-com","tag-oil-supply","tag-stuart-burns"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/51900","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=51900"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/51900\/revisions"}],"predecessor-version":[{"id":51901,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/51900\/revisions\/51901"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=51900"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=51900"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=51900"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}