Crude oil prices have been on a roller-coaster ride since last year. The commodity
saw some of the darkest days in its entire history when WTI crude oil prices touched
negative territory in April last year due to coronavirus pandemic-induced challenges.
There was nearly no demand for crude oil, as COVID-19-led lockdowns impacted the
to-and-fro movement across national and international borders. However, the
situation has changed now. As of May end, the crude oil prices have rallied more
than 35% in the last one year.
The production cut decision by OPEC and its allies to clear oil gluts and a stable
market have lifted the prices to their pre-pandemic levels. Additionally, Saudi
Arabia’s unilateral decision to cut its production by 1million barrels per day (mbpd)
has positively influenced the oil market.
The crude oil price has direct impacts on the sectors such as aviation, transport,
lubricants, plastic, fast-moving consumer goods, rubber, and paint. As soon as crude
oil prices go down, the transportation cost also declines, thus lowering the expense
of a company. While on the flip side, lower crude oil prices could negatively impact
an oil & gas firm. The maximum impact is seen on the upstream industry in the entire
value chain of the oil & gas industry, as the latter involves most of the industry's
expense to extract crude oil and gas. However, with lower crude oil prices, the
downstream sector can earn higher margins.
#crudeoildynamics #crudeoilprice #crudeoilimpactoneconomy #OPEC #impactofcostdynamics #kalkinemedia
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