Oil prices have fallen on Thursday following three days of gains, with the prospect of rapidly dwindling demand due to coronavirus travel bans and lockdowns offsetting hopes a U.S. $2 trillion emergency stimulus will shore up economic activity.
This news comes after two consecutive weekly inventory builds, the first of 7.7 million barrels, for the first week of March, and another, of 2 million barrels, for the second week of the month reported yesterday by the EIA.
All this demonstrates is how futile any attempt to deal with the drop off in oil demand has been since the start of the global virus crisis. Even if all oil producers completely stopped pumping, all that would do is cause panic of a sudden lack of supply, causing more concern about how to restart operations once things are back to normal.
For OPEC it has been a Catch-22 situation ever since its attempt to crush the US shale oil industry in 2014. It is caught between continuing to lose market share to growing US production, which was also depressing prices and cutting their margins, or try and reduce US market share by producing more, which also cut prices and their margins.
Damned if they do, damned if they don’t. Then throw in the problems from the virus and you have a right mess of a situation to deal with. There has to be some significant changes to markets after things get back to normal, how can things go on as before?