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Lithos Capital

Apr 20, 2020

On April 12th, the world’s top oil producers pulled off a historic deal to cut global petroleum output by nearly a 10th. Today on April 20th, just 8 days after the deal that was supposed to stabilize oil prices, the WTI crude oil totally collapsed, with the price going to zero and oil futures contracts even falling below zero, trading at negative prices .

What is happening right now is seriously disturbing and beyond all expectations. Even though the perfect storm was already here with the plunging demand and reports from oil producers running out of space to storage their barrels, nobody expected the magnitude of the collapse we are witnessing.

The effects this is going to have on the global economy might be even worse than those from the COVID-19 pandemic. A lot of emerging economies are heavily dependent on oil, including many countries in South America which were already in economic trouble even before the pandemic.

At the moment, Brent crude oil is still trading at $25.95 USD, around 20% lower since the oil deal made on april 12th and 62% lower since the beginning of the year in course. What happens now is a wild guess.

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