International Business Writer
Despite oil prices just beginning to bounce back from the economic crisis caused by COVID-19, the oil industry takes on another hit as thousands of investors rush to sell their stock. As of the beginning of September, oil prices hit their lowest price in nearly three months after the Organization of Petroleum Exporting Countries (OPEC) company reduced the price of oil to $36.76 a barrel. With the recent turbulence of the stock market, investors are running out of oil stocks. Oil companies like Apache, Occidental Petroleum, and Diamondback Energy all had a 6% decrease in their stock value. Along with trouble in the stock market, the oil prices are highly affected by the supply and demand of oil in the market.
With a large supply of oil in the market and a large decrease in demand due to the pandemic, the price of oil fell dramatically, as seen in March when it hit its lowest at -$40 a barrel. In order to combat the low market price, the Organization of Petroleum Exporting Countries (OPEC) and Russia helped trigger a V-shaped recovery by decreasing the supply of oil through unprecedented production cuts. In this event, the market demand increased which helped the oil price increase to $40 a barrel in just seven weeks. Considering the quick bounce back of oil prices, OPEC and Russia agreed to slowly increase the production levels to maintain an equilibrium. However, due to the projected increase of demand, the increased planned production expansions caused another surplus of oil as the demand continued to stall under the pandemic pressure. Oil demands were expected to increase exponentially due to road traffic returning to normal numbers. Unfortunately, the demand for air travel has not increased at the amount that was predicted, and crude oil for planes has remained extremely low. As a result, there has been another surplus of oil that has emerged that reduced the price of the crude oil barrel due to the change in market value.
While the market price of crude oil is expected to continue to be weak throughout the fall, energy analysts do not expect oil prices to hit negative numbers like they did in March. Analysts are projecting the oil prices to be is no lower than $30 a barrel. However, many do not believe that prices will go into the negative numbers again.
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