DMPQ- What are the reasons for sudden fall in the crude oil prices ?

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Oil prices plummeted to $35/barrel and it saw the biggest fall in single day. The fall in oil prices are due to various reasons which are as follows:

  • Failure of OPEC-plus cooperation. Russia rejected the request of Saudi request to effect more cuts in output given the fall in demand owing to the economic impact of the coronavirus break.
  • Global coronavirus effect has led to the decline in the aggregate demand. The major demand comes from China which is the most affected by COVID-19. Hence, it is resulting in the overall reduction of demand. Supply is not getting managed. The excess supply is resulting in lowering of crude oil.
  • Both Saudi Arabia and Russia wants to destroy the shale oil market dominated by US. Both wants to take to appoint where investing in shale companies will become a unprofitable affair.

It has to be seen that to what extent the reduction can be managed as it will hamper the oil producing and exporter economy too. Their budget will get affected by such excessive glut of oil in the global market.

 

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