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Oil Deal Should Help Restore A Supply/Demand Balance (Sort Of)

Oil Deal Should Help Restore A Supply/Demand Balance (Sort Of)


The world’s top oil producers (called the OPEC+ Alliance) pulled off a unprecedented deal to cut global output by nearly 10%. The deal is likely not enough to offset the impact of the COVID-19 pandemic.

  • OPEC+ will cut 9.7 million barrels a day.
    • Prior to this historic cut, OPEC’s single largest cut was in December 2008: 2.2 million barrels a day, according to IHS data.
  • Other nations, including the U.S., Norway and Canada also announce supply cuts.

The decline in global oil demand this month alone — 25 million barrels a day — is roughly seven times larger than the biggest decline after the 2008 economic crash, according to data by IHS Markit. Demand is down roughly 22% YOY.

Prices:

Oil prices are hovering near 20 year lows, with U.S. prices (WTI) closer to $25 and International based Brent around $30. Year to Date, national gasoline prices have fallen from $2.60/ gallon to $1.86/ gallon while sub $1/ gallon gas is now being found in Kentucky, Ohio, Oklahoma and Texas.


Disclosure: This Commentary represents a review of topics of possible interest to Pennsylvania Trust’s clients and is not personalized investment advice. It contains Pennsylvania Trust’s opinions, which may change following the date of publication. Information obtained from third-party sources is assumed to be reliable but is not guaranteed. No outcome — including performance — is guaranteed, due to various uncertainties and risks. This document is not a recommendation of any particular investment. Investment decisions for clients are made on an individualized basis and may be different from what is expressed here. Past performance is no guarantee of future results.