Okay, here’s the thread.

There exist many pricing indices in the oil market, but two of them are most popular – the Brent (adopted by most OPEC countries) and the West Texas Intermediate (WTI),

adopted by US & Canada. Brent crude is usually more attractive ‘cos of its low sulphur content, which makes its fractional distillation into various refined products such as petrol, diesel, etc. easier.

The US, being one of the top 3 producers of oil, produces upwards of 13mbpd, and given the low demand environment we currently are in, most of the US production in recent times have ended up in storages.

We would naturally think since this is the case, US should reduce production or halt it altogether, for the time being, but the shale oil production infrastructure, which they invested heavily in, is such that the cost of keeping it running is way cheaper

than what it would cost to restart it after a stop (just as is the case with rigs, if you understand their operation).

Now, having to keep producing in huge volumes, a commodity that it can barely find market for at this time,

the US is caught between the devil and the deep blue sea. Storing most of its production, the US is fast running out of storage. Therefore, the US will have the crude oil go at any price, to free up storage.

Summarily, the US is well on its way to start paying buyers to take its crude oil – Negative Pricing.

Whilst the Brent has not hit the record low that the WTI has now hit, it goes without saying that buyers will soon find the US high-sulphur crude more attractive,

for its price, than the Brent and Nigeria’s better quality crude. It is only a matter of time…and a very short one in fact.

On why demand for oil is low worldwide, in the wake of the novel corona virus, almost all major economies, and more importantly, huge oil consumers

(China,India etc) are shut down resulting in significantly lesser demand for refined petroleum products, and by extension, their major raw material – crude oil.

Simply put, the world is at a halt, thanks to COVID-19. We must defeat the virus, else, it may be the beginning of the end!

Thanks fir your time guys