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Your pandemic derision It also caused a loss of collateral, a complete surprise to markets and analysts.
And analysts are now quickly warning that it could lead to changes in the global economy.
The very idea that a good can be sold at a negative price seems outrageous, indicating a complete reversal of the roles of buyer and seller.
Only when we talk about oil, of the blood itself in the veins of modern economySuch adventures are not exactly new.
As we all experience, on April 20, 2020, at that nightmare meeting, the price of US crude, delivered in May, fell for the first time in its history below $ 0 / barrel.
Texas crude even reached -40.32 dollars / barrel. The historic decline was yet another clear proof of the economic importance of its global health crisis. Covid-19.
But what caused the complete reversal of prices and roles? Oil not available in Oklahoma tanks, where the United States’ oil reserves go.
Stocks were now higher than production and demand was low due to the pandemic. Those with stocks now paid to ditch their unavailable goods!
Naturally, the total collapse in oil prices sent chills down the spine. And it was a shock of epic standards.
Market participants even spoke about redistributing forces on the global economic chessboard, with the plate now tilted from the developed world to the developing world.
However, oil has always had a way of playing an important role in the market and resisting expert predictions.
Who wins and who loses every time
Westerners will still remember the dramatic rise in oil prices in 1973 and 1979, with boycotts and speculative games from oil-producing countries that made Europe and America run and fail.
Analysts say this has been the case since the early 2000s, with oil prices rising steadily and staying high until 2014. Not only the western consumer but also the developing world have been aware of these ups and downs. , who was hit even harder.
Who benefited from this? The oil-producing countries, which accumulated untold sums. Emerging oil companies like Petrobras Petronas from Brazil and Malaysia have grown in the global market.
As Russia did, it came back strong as a major geopolitical power thanks to the strength of companies like Rosneft, Lukoil, and Gazprom.
Every increase in the price of fossil fuels is shaking up the world economy, only it works backwards. For the vast majority of states in the world, the recent drop in oil prices is a blessing.
Emerging markets such as Indonesia, the Philippines, Argentina, Turkey and South Africa benefit the most, as oil imports reflect a good percentage of their total imports.
Cheap energy can offset a percentage of your losses. derision. At the same time, however, low oil prices are a severe blow to its producers.
The fourth wave
This is not the first time that oil has collapsed. The first took place in 1985, when Saudi Arabia started its own price war to regain the market share it had sacrificed at the feet of other OPEC oil producers.
The second occurred in 1997, when the economic crisis that affected Asia caused a sharp drop in demand. A third one came in June 2014 and had to do with EE shares. The US, which forever changed the balance between supply and demand.
This decline was temporarily halted in September 2016, in that historic agreement OPEC and Russia to limit both its production. We are now living in the fourth oil price crisis, facing the unprecedented drop in demand due to a coronation.
In fact, the talks between Russia and Saudi Arabia ended in a stalemate in early March. Russia has refused to limit its production, and Saudi Arabia has responded by doubling its oil production and launching it into the global market with bold discounts.
The landscape remains cloudy. However, because negative US crude oil prices for May delivery may be primarily due to technical storage reasons, their prices remain at a record low for June.
Analysts estimate that current oil prices (similar to inflation) are similar to those we last saw in the 1950s, when the heads of the oil market were the United States and the British Empire and its countries. Persian Gulf they were just new players.
Today’s losers
It is a fact that we tend to see oil-producing countries as robust economies, as if you were making money. It’s just that things are not exactly like this.
In early February, even before it became a mockery of global cowardice, warned the International Monetary Fund that Saudi Arabia and the United Arab Emirates will be indebted to all of them until 2034.
Bahrain is avoiding the financial crisis with money from Saudi Arabia and Oman is so deeply in debt that it will certainly seek help in Riyadh or IMF.
Only the economic profile of the Gulf countries is not typical of most oil-producing countries. Where the debts are large, they are manageable.
Brazil’s Petrobras, for example, closed in 2019 with a debt of $ 78.9 billion, one of the largest in the oil market, but nobody is in a panic.
Something similar is happening with Petronas, which has represented more than 15% of Malaysia’s total public revenue in the past five years. Rating agencies appear pessimistic in your predictions, the company still retains the A rating.
This is because they are thriving companies with tentacles in the globalized economy. Venezuela, on the other hand, cannot say the same. The Maduro government has been under intense pressure since 2014 and the fall in oil prices.
Ecuador is the second Latin American country with the most pressing problems. His government recently froze $ 800 million ($ 65 billion of its national debt) as falling oil prices delayed its forecast. Something similar happened in Argentina.
This is the profile of the countries mainly affected by the current oil crisis, densely populated countries whose productive economies depend directly on oil.
Leaving aside Iran and the special situation imposed by the sanctions of the United States, neighboring Iraq, that 90% of GDP Dependent on oil, it is already struggling to pay its officials.
Algeria is also extremely vulnerable, with its oil reserves once representing 1/3 of its GDP in 2018. according to the IMF, they were exhausted. The Fund expects its reserves to drop below $ 13 billion in 2021.
The only thing that saves her, for the moment, is the fact that she has no national debt. This is not the case for the two main sub-Saharan oil producers, Angola and Nigeria.
Angola’s debt soared from 30% of its GDP in 2012 to 111% in 2019, which means that 1/3 of what it derives from its oil exports goes towards paying off national loans.
And that without the recent drop in oil prices. That is why the country’s 10-year bonds have recently been revalued at the lowest CCC + and are considered extremely risky investment move.
Last month Bloomberg estimates how Nigeria overtook South Africa and became the largest African economy. However, a large and diversified economy continues to depend on its oil, which accounts for most of its GDP.
With the outbreak of the new oil crisis, the Nigerian finance minister described the country as an “economic crisis” and Standard & Poor’s downgraded it to B-, increasing its borrowing costs.
Oil as a political and social regulator
Any fluctuation in oil prices marks periods of growth or recession in the global economy. The adventures of prices in the 1970s and the nationalization of the oil industry in Middle East brought the final end of the call was imperial.
The 1980s saw the creation of a global energy economy, and in 2000 it seemed to open the door to a new era of “state capitalism”, where China became the main lever of demand and giants like Aramco and Rosneft managed the offer.
A milestone here was in 2014, when the collapse of oil prices caused problems for this model of oil capitalism. Your growth rate China It is not as high as it used to be, and the entry of the United States has created problems for OPEC and Russia in trying to control the market.
As the recent wreck in attempts to stabilize oil prices in the global pandemic has shown, there is no real regulatory factor in the oil market. Not even a class.
Oil contracts diplomacy is fragile and nobody knows who wants what. Analysts still wonder what the US government really prefers. USA, high or low prices.
But what does the menu include for the future? Given how unforgiving the markets are? At a time when countries like Iraq, Algeria and Angola the crisis is really existential, giants like Saudi Arabia and Russia will use its rum to survive the situation.
The International Monetary Fund and the World Bank are waiting for many of the small oil producers to line up for financial aid. The regulatory factor here will undoubtedly be China, which since 2004 has more than $ 152 billion in debt African, Asian and Latin American states.
Beijing currently owns a large percentage of the external debt of Venezuela and Angola. What it intends to do and what it will eventually do is crucial not only for the economies of the two countries, but also for the world economy.
The reorganization that analysts at the largest rating agencies fear most. In whose exhibitions they appeared anxious about how vulnerable these fossil fuel producers are before the coronary eruption.
How will they respond to negative oil prices, in this inconceivable condition where oil traders pay potential buyers to buy their oil?
These vulnerable actors in the global oil market in the Middle East, North Africa, sub-Saharan Africa and Latin America must differentiate their national economies and not depend on petrodollars to survive.
And let the rest of the world survive on them.
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