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Oil crisis continues – shutting down the industry inevitable?

The oil industry is currently in a mess right now as the oil prices slipped exponentially, oil traders running out of storage
The oil industry is currently in a mess right now as the oil prices slipped exponentially, oil traders running out of storage spaces to stash oil.

According to a Bloomberg report, The oil prices started to fall as soon as COVID-19 got declared as a pandemic. When a lockdown was initiated, the demand for oil went down as most of the people were at home. As the traders weren’t making sales, liters and liters of oil started piling up, resulting in a loss of storage space. With innovative thinking, most of the traders resorted to storing crude oil in ocean-going tankers.

The situation worsened for a while as the price of one barrel of crude oil slipped to a negative value.

According to an oil trader, this is just the beginning of an end. The oil industry will witness its most significant depression during mid-May. The price of crude oil of West Texas Intermediate fell to – $40 last week, but this is not the worst as the traders will begin to witness many more nightmares soon.

Before the pandemic, oil companies ran approximately 650 rigs in the United States. Now, as of April 24th, more than 40 percent was cut down as the companies are working with just 378 platforms.

According to Trafigura, one of the largest exporters of US crude oil estimates that the sale in Texas, New Mexico, North Dakota, and many other states will fall much faster than expected, and the price of crude may even reach negative again.

Until recently, that is, before the price fell to negative, the consensus is that the output would gradually drop by about 1.5 million barrels a day by December, but now this same loss is expected by June end.

Many companies like ConocoPhilips and Continental Resources have announced to shut the output.

Coming to the manufacturing and procurement of oil, the producers have closed 6,000 wells, which would support approximately 405,000 barrels per day. This is roughly a 30 percent reduction.

Oil Refiners shut

As we are about to enter an era of economic depression, the oil sector would get hit significantly.

In no time the total shutdown will reach out to the oil refining sector.

Over the past week, Marathon Petroleum, one of the largest refining companies in the US, announced that it would completely cease the production of oil at a plant near San Francisco

Royal Dutch Shell has stopped the refining process in several plants near Alabama and Louisiana. Many oil refinery companies across the world are going through the same situation as closing down the plants might become a reality soon. The US oil refineries processed just 12.4 million barrels on April 17th. This was the lowest in the past 30 years.

The director of Facts Global Energy mentioned that the global production of oil might slip by 25 percent in May.

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