The Oil Wars
Remember how 2020 started with the possibility of a Third World War over oil? The top oil producer's of the world are meeting today to strike a balance. Will they succeed? ReadOn!
The world today is witness to how a single virus can bring entire economies on the verge of a collapse, trigger the biggest oil price war and threaten the existence of mankind.
The coronavirus has pushed (or rather quickened the arrival of) a global recession.
As the world glued their eyes to China, another deep crisis was shaping up. A crisis triggered at the starting of 2020, when the US killed Iranian General – Qassem Soleimani.
This move perpetually pushed the countries on verge of World War-III.
Yes, 2020 started with the possibility of a World War!
Most of the world's oil production is controlled by the US, Russia and a cartel called the OPEC (Organisation of Petroleum Exporting Countries).
Their job? - To control and manipulate the supply and prices of oil for stability.
But with COVID-19 at the helm of things, airlines were at the brink of bankruptcy, the tourism space collapsed and health spending went over the roof. The need for production cut was natural and necessary to ensure stability.
OPEC was aligned. They decided to go for an aggressive oil production cut.
But Russia, the third-largest supplier of oil in the world and accounting for 12% of all oil produced, saw an opportunity. It declined to comply, thus triggering one of the worst falls of oil prices in history.
Having been informally together in control and manipulation of oil prices for roughly 3 years, OPEC boldly assumed Russia would connect with its reasoning (COVID-19) to cut production. But, Russia did not oblige.
OPEC, in a counter move, threatened to flood the markets with oil overflow and thus drastically pulled down the oil prices (a tactic it had tried earlier on the US and failed).
For context - the price of Brent Crude Oil was 55.6$ dollars approx in Feb 2020. In March it fell to 32$ dollars.
But the worse was yet to come.
For the first time in history, oil prices turned negative. Why? Here, listen to this audio summary (in a human’s voice). One liner explanation - the price of the barrel was more than the oil it held.
The mayhem that the industry saw in summer 2020 was concluded to be a once in a lifetime event.
It eased into a production cut: 7.7 million barrels per day (August) from 9.8 million barrels per day (in May). But as the COVID-19 pandemic raises its fangs yet again, OPEC finds itself in a panic mode.
OPEC's recently concluded meetings saw countries like Russia, the UAE and many others on different tangents for production, supply, and of course, cuts.
Another meeting is scheduled on the 3rd December 2020:
With all countries trying to throw their weights around, will 2021 see more production cuts or a flood of oil?
Watch this space.
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