The oversupplied market is crashing oil prices

Oil closed the session with losses. The downward pressures on the price of oil were already expected, as the oversupply in the market remains extremely wide, while demand continues to be depressed. Storage tanks, ships, and pipelines are becoming saturated at an accelerated rate, increasing nervousness among market participants.

By April 17, 60% of crude oil storage capacity in the United States was occupied. The delivery point, Cushing, Oklahoma, storage is at 76%. The market fears that if production and demand continue at current levels, the capacity to store crude oil in the United States may be depleted in late June.

Given this, the WTI lost 22.79% of its price and closed the session trading at $ 13.08 per barrel. Meanwhile, the price of Brent fell by 6.44%. Moreover, it closed the session trading at $ 20.06 per barrel. The Mexican export mix closed the week on April 24. It traded at $ 8.53 per barrel, which is a 40.56% drop in its price.

How many North Sea jobs losses can the market shock cause?

There are rising fears that the negative impact of the coronavirus on oil prices and the ongoing downturn in the industry could be the reason for several thousand job losses. 

According to the survey conducted by OGUK, many firms in the oil and gas sector contracts would struggle to survive. OGUK considers that the industry’s pain may last much longer than the pandemic itself. 

Brent fetched as much as $120 per barrel. Currently, it is trading lower than $20.

OGUK anticipates capital losses in the North Sea to fall to around £3.5 billion ($4.4 billion) this year. The figure is the lowest on record.

Furthermore, around 30% of the companies surveyed stated they succeeded in securing funding as part of the UK government’s coronavirus assistance package to pay workers in April, May, and June. Still, it may not be enough for thousands of jobs. Job cuts amount to 30,000. The industry employs around 150,000 people directly or indirectly. Besides, many more job losses are expected in the coming months. 

Deirdre Michie, Chief Executive of OGUK, stated that after the most severe downturns the oil sector has experienced, the findings confirm a pessimistic outlook for the UK oil and industry.

Michie said that the UK needs a transition to a net-zero future. It could be achieved with a three-stage plan, including addressing the oil and gas sector’s critical needs, its industrial recovery, and an accelerated transition to net-zero greenhouse gas emissions.