|Unstable Oil Industry (hybridplastics.com)|
In April, the Organization of Petroleum Exporting Countries (OPEC) and OPEC+, a group of oil-producing countries that are not in OPEC, like Russia, agreed on reducing oil production to 9.7 million barrels per day in May and June to deal with the dramatic drop in oil prices. Oil prices rose continuously over 20% in few days in May, as people expected that the demand for oil would increase because oil-producing countries have reduced their oil production and many countries are relaxing blockade regulations due to COVID-19, and the economy will be normalized soon. However, oil prices keep fluctuating. Many experts pointed out that it would take a considerably long time to recover the price and the balance of oil supply and demand. In an earnings announcement in late April, Ben van Beurden, the CEO of Royal Dutch Shell plc, conveyed a negative prospect, saying, “Will demand ever go back to where it was? That is hard to say,” and “We live in a crisis of uncertainty at the moment; we don’t know what is on the other side.” Many variables to consider other than an inventory problem, whereby oil tanks will be full due to an oversupply of oil, which is also referred to as “tank top”, make future oil prices more unclear. Global demand for oil can be further contracted as a relationship between the United States and China is threatened because of a trade war and China’s passage of new national security law. Also, Iraq, the second-biggest oil-producing country in OPEC, is unstable because anti-government protests have been spreading since October 2019.
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