Oil prices have tumbled as global fuel consumption shrinks from the pandemic, as well as the supply shock caused by the end of OPEC and Russia production cuts.
Crude oil prices stamped a quarter of a year fluctuating the largest loss in history, and fell about 55 percent in March, in the most severe loss ever. Prices also fell to their lowest levels since 2002 on Monday.
According to the Paris-based Energy Agency, there are five million barrels of oil extracted per day that do not attract enough premiums to offset the costs of extracting them from the fields.
The agency said in its report that the prices available to producers in western Canada fell to the single digit, while cases of negative prices appeared in parts of North America for other materials.
Oil producers have responded by applying big cuts in their spending on new production, and initial cuts revolve between 20 and 35 percent, compared to what was planned for 2020, according to the report.
The Energy Agency had previously forecast 50 to 85 percent declines in net income for a number of producing countries in 2020, compared to 2019, but those declines may be even greater depending on how shocking demand is.
A number of major oil companies are re-evaluating their existing portfolios, which could lead to a new wave of refinement closures.
The agency also warned of the repercussions of the collapse of the oil price on other energy sectors, adding that lower oil prices for an extended period will affect the chances of switching to clean energy sources such as natural gas.
“Oil at $ 25 a barrel will cause some global gas suppliers to suffer to cover operating costs, and the recession in the spot gas market will not provide any aid,” she said.
Prepared by Ahmed Elhamy for the Arabic Bulletin