question archive Patel(DQ) During this unprecedented pandemic, oil demand has fallen significantly which caused drop in prices
Patel(DQ) During this unprecedented pandemic, oil demand has fallen significantly which caused drop in prices
Subject:EconomicsPrice: Bought3
- Patel(DQ)
- During this unprecedented pandemic, oil demand has fallen significantly which caused drop in prices. OPEC had total control over supply and price of oil before shale oil revolution. Now, they are facing high competition with non-OPEC shale oil production. OPEC members must cut their oil production to match with demand. It is equally important to make a deal with shale oil production countries to cut their production as well. If shale oil production countries don't reduce their production than OPEC can lose their market share.
- It is very challenging to achieve this goal. Recently, OPEC and Russia agreed to cut oil production which called OPEC+ deal. When OPEC makes a deal with non-OPEC country for production cut is called OPEC+ ("Daytrading.com", 2020). OPEC and Russia are planning to cut oil production to meet their budget needs and keeping price below $50 per barrel to keep other shale oil producers keep out of current market (Saefong, M., 2020). Due to high production cost of shale oil, non-OPEC countries will stay out in current low demand market. Second wave of corona virus is also raising concerns in oil demand if more countries would shut down again. Oil market is highly uncertain at this moment until pandemic is over.
