Crude oil and global development
Crude oil is a raw material for which demand has been growing steadily and for decades. It is a global commodity, used on a massive scale in the world, and its price largely shapes the pace of economic development. The price of oil is determined on international markets, and the crude oil market itself offers investors a wide spectrum of possibilities.
In this article, we will take a brief look at the market for ‘black gold’ as crude oil is called, and development speculation in 2020.
Types of crude oil
There are three types of crude oil used in commercial markets.
The first is American crude oil, generally called WTI (West Texas Intermediate) – light, characterized by low levels of impurities, low viscosity and sulphur content (less than 5%). It is WTI crude oil that large-scale oil companies and investors trade in. Its prices are listed on the energy raw materials market, next to Brent and Ural crude.
Brent crude, in turn, is an important reference point for markets in Europe, Asia and the Middle East.
Russian Export Blend Crude Oil – Ural
This type of crude oil is extracted mainly in Siberia and the Urals, where the name of this resource comes from. It is a type of medium or heavy crude oil.
The difference between the prices of these goods is constantly changing in different directions, depending on the relationship between supply and demand in each market. Predicting the development of prices in the crude oil market is quite difficult, due to the large number of economic factors that shape the price. Consumers are large crude oil refineries, and their demand depends in turn on the demand for diesel and gasoline. What is currently happening on the crude oil market is an unprecedented situation in the history of this raw material and the prices listed on the NYMEX.
Negative oil price …
Such a dramatic change in prices was influenced by several factors, including the coronavirus and a decrease in oil demand of around 30 percent.
It is the fall in demand, lack of storage space, and the unprecedented surplus of oil supply, which not only exceeds current consumption but also the possibility of storing oil, that have led to prices on the physical WTI market dropping dramatically.
And there is no chance that even news of a planned reduction of crude oil production by 1/3 will change this situation for the time being, so a slow increase in prices in predicted. Investors forecast that this will happen at the end of the year, but we do not know exactly what magnitude this growth will be and how the pandemic will develop. The crude oil production curve in forecasts for the future will decrease significantly, which is the forecast for the next 3 to 5 years.