In the Permian Basin and other oil fields across Texas, idle pumpjacks dot the horizon. Demand for oil has plummeted as government-mandated social distancing and shelter-in-place orders due to the coronovirus pandemic have grounded planes and halted motorists in major cities.
Matt Smith, director of commodity research for ClipperData, says low demand plus a price war between Saudi Arabia and Russia has pushed prices to levels with the potential to crush local economies in West Texas and beyond.
“Although this may just be for a fairly limited time, we are see demand down considerably,” Smith says. “As you would expect, just seeing lockdowns across all these different countries. So, although this may not last for months and months and months – at least for now – the estimate is we are down to a fifth from what it is normally, which is a huge amount.
What you’ll hear in this segment:
– How much less oil the world is using now than normal
– What “super contango” is, and how it will affect the oil industry
– How oil prices can actually go negative