In order to proactively cope with the challenge of uncertainty in petroleum products demand, oil industry experts have suggested some essential steps required by the government with a clearer view on the lockdown timelines i.e. its continuity and end, so that the oil industry can plan and maintain the supply chain equilibrium.
They said instead of expected pickup in economic activity in 2020, the Covid-19 pandemic caused crises resulting in major economies to shutdown initially, and then completely.
Travel restrictions/bans were imposed, which severely impacted the market fundamentals of jet fuel, and many airline companies have either declared or are on the verge of bankruptcy.
For example, jet fuel in the Arab Gulf traded at $77 per barrel on 1st Jan, it went down to $5 per barrel and has now slowly nudged to $14 per barrel today (i.e. 6th May).
As lockdown was imposed in more and more countries, the motor gasoline demand crashed all over the world and for the first time in history motor gasoline became cheaper than crude oil, which made refineries reconsider their production plans in the current times.
Further, the substantial decline in demand led to product overflowing and making suppliers store in vessels due to non-availability of on-land storage. In the beginning of Jan 2020, motor gasoline traded at $70 per barrel and then touched historic lows to $ 7 on 22nd April.
However, now with some positive news of the US summer season coming up and the possibility of improved demand sentiments, the price has unsteadily increased to $20/barrel.
Diesel started the year at $80 per barrel and remained relatively stable till March, after which, it started to decline to touch $14 per barrel around 22nd April.
It has again started to show a positive price trend with recent prices hovering in the $20 per barrel range even though diesel is mainly used for goods/food items transport, which has continued to run in most countries.
According to the market experts, the said price decline of most products to historic levels is primarily due to market imbalance due to massive global oil stock overhangs.