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IPFS News Link • Oil

Visualizing How Oil Prices Went Sub-Zero: Explaining The COVID-19 Oil Crash

• https://www.zerohedge.com, by Tyler Durden

Last week, Visual Capitalist's Jeff Desjardins dug into the unprecedented number of initial jobless claims coming out of the United States, which topped 22 million in a period of four weeks.

It's just days later, and we already have our next market abnormality: this time, traders were baffled by West Texas Intermediate (WTI) crude — the U.S. benchmark oil price — which somehow flipped negative for the first time in history.

How is that possible? And how does it tie into the COVID-19 oil price crash in general?

Setting the Geopolitical Stage

Oil is a geopolitical game, and big price swings always come with a geopolitical undercurrent.

This particular story picked up steam in February as OPEC+ producers tried to negotiate a production cut, amid concerns that COVID-19 could impact demand. Russia walked out on these meetings, and Saudi Arabia responded by undercutting oil prices by $6-8 per barrel.

The world went into lockdown, energy demand dissipated, and oil producers continued to pump at will. Then on April 9th, nearly a full month after COVID-19 was declared a pandemic, Russia and Saudi Arabia finally settled their differences.

However, this truce came too late — prices had already fell about 60% from February highs.