Oil prices may still be trading down by double digits from the start of the year, but WTI rallied on Thursday for what is probably its best day ever, increasing by 24.53% on the day in afternoon trading.
It’s possible WTI just came off its worst day ever, after on Wednesday as traders feared there would be no end to the oil price war at a time when the coronavirus continues to ravage oil demand—first in China, and now in the United States. The two unfavorable supply and demand once-in-a-lifetime situations (or a few-times-in-a-lifetime if you’re talking about OPEC ramping up production to squeeze everyone else out of the market) pushed oil prices down by double digit percentages on Wednesday.
But WTI has since rebounded, after the Trump Administration proposed new measures aimed to stimulate the economy as businesses are forced to shutter and many employees are finding themselves at least temporarily out of a job.
The dire situation in the oil markets are putting pressure on Saudi Arabia, other OPEC members, and Russia, all who are fighting for market share by ramping up their oil production. The current limitations on global oil storage are concerning, as are the viability of the entire US shale industry, which most suspect has an average breakeven well above today’s current price.
The question remains now how long the oil price war will last, which will largely be determined by which overproducer will buckle under either the pressure applied by oil-dependent nations who are not able to make ends meet, or under the pressure of its own inability to make ends meet.
By Julianne Geiger for Oilprice.com
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