Falling oil prices amid coronavirus pandemic: What it means for India and other players
Forget the sub-zero oil price (futures) shock that upended all our notions of the geopolitics of oil and prompted commodities exchanges to incorporate negative pricing in their software. Instead, follow the progress of Awtad, Jana, Aslaf and Lulu as they head to the United States. These supertankers, carrying 2 million barrels of crude oil each, are currently steaming their way to the US to dump their oil. They are among the first of a veritable armada of supertankers, with a total of almost 40 million barrels, which are expected to land in the US through May and June. This is what might affect the geopolitics of oil, and could be the logical tipping point for the world.
The US itself is groaning under the weight of its own oil. Shale producers, who have, for the past five years run rings around traditional oil producers like Saudi Arabia, are facing unprecedented production cuts, storage glut and crashing demand. The Covid-19 challenge and a global economy in tatters have put the spotlight on the US’ decision: does the US want lower or higher oil prices? In an election year, it’s a tough one — the shale industry sustains jobs in many states that vote for US President Donald Trump. Meanwhile, lower oil prices would help in the US economic recovery and give more jobs to people. Will Trump heed the outraged people of Texas and North Dakota to ban Saudi oil from landing in US ports? Or, will he let the markets rule, and kick his own oil industry? Either way, the US-Saudi relationship has reached an inflection point.
