CRUDE OIL: The epic fall due to Coronavirus

Corona virus outbreaks have disrupted almost everything happening around the world. Most cities around the world are in a state of obstruction, which means people have been instructed to remain quarantined in their homes. When it comes to selling goods and services, strict laws are being introduced to maintain social distance and save more lives.

The epidemic is already the third stage in many countries and has resulted in more than 1,996,000 deaths, with more than 2.8 million people worldwide. If we talk about our own country, the scenario is not very different from the rest of the world, so far 24,506 cases have been confirmed, and 775 people lost their lives in this epidemic and the numbers would this increases over time as you finish reading this blog. To prevent the spread, all affected countries have reported an indefinite siege, which depends on the country's recovery rate.

This barrier has seen a huge drop in demand for oil. Because most production units in heavy industry, automobiles and factories have ceased operating, it is almost impossible to build up this scarce mineral resource.

According to the report, the oil market has experienced high upheaval as a result of the epidemic, and demand has dropped 30 percent, a big amount. The United States and Brent recorded huge losses in three straight weeks due to the closure of all major production units globally. Brent crude reportedly fell 3.42% or 73 cents.

The main problem that cannot be ignored is that storage units are being filled globally. This over-storage will ultimately lead to a reduction in increased oil production. The companies who are exporting Petroleum to other Countries (OPEC) and their allies have actually decided to reduce production by 9.7 million bpd. Russia plans to halve oil exports in May, with North Dakota's largest oil producer, Continental Resources Inc., halting most of its production.

The global repository is already growing, and if the reports are to be convinced, the onshore oil supply is filled with oil, comprising 85 percent of its total capacity. This is not a good sign, because when this barrier is removed, demand for oil will rise like wildfires, and at the same time all oil production units will try to offset the losses, after which Most production units have suspended all future investment and expect further delays in further projects.

These delays will reduce global oil and gas supplies and are expected to reduce global supply by 6.3% by 2030, as it is estimated that $ 195 billion in shale projects will be delayed.

However, this global downturn in oil prices can be beneficial to the economy. According to research by Kotak Institutional Equities, India's economy will see remarkable benefits from falling international oil prices in the form of lower current account deficits, higher GDP and lower inflation.

Lower oil prices give important dangerous effects on the Indian economy in the form of a lower current account (50 basis points of GDP or $ 15 billion for every $ 10 per barrel drop in oil prices), lower expansion (30 basis points per $ 10 / barrel) and improvement. If the reports are to be believed, it could be an opportunity for the Indian economy to emerge from the 11-year recession in current growth rates and climbing inflation.

The outbreak, which originated in China, is at its peak and has affected more than 200 other countries and territories and will continue for several more months. This means that demand for transport and production will remain stationary for a long time. We are experiencing something that we have not seen or dealt with before, it is important that we hope in these times and try to keep ourselves safe. Hopefully the fall in prices will have something good for us all. It will also pass.

Stay at home, stay safe.