Overview of Crude Oil Prices

Crude oil refers to the non-refined form of oil extracted from either ocean beds or pumped out of the ground. Crude oil is naturally occurring and contain various types of hydrocarbons and organic materials. Crude oil is refined into various types of products that are used in the market. Some examples would include Gasoline, Aircraft Fuel and other petroleum products.

Because of its ever growing importance, crude oil is also traded across the world as a commodity. They remain a crucial element of countries economic superiority as crude oil helps generate electricity. Crude oil is often referred to as liquid gold because of its importance in global politics.

2020 - The year for the Crude Oil

The year 2020 has seen major upheaval in the global economic forums. With the pandemic hitting and the subsequent rendering of businesses shut, the economy has gone for a toss. Many sectors have recorded tremendous losses due to the closure of retail space, shut down of airspace. Crude oil has also witnessed a whirlwind ride in the year. At the start of 2020, crude oil was trading at $63 per barrel. With the onset of the pandemic, the prices have come crashing down to below $10 a barrel. This was partly due to the fact that as countries were going for a lockdown, the demand for crude oil dropped significantly. This resulted in oversupply and a shortage of buyers, thereby crashing the prices down.

The oil prices has since the announcement of the vaccine has recovered quite drastically. As economies open up, the pent up demand is expected to further drive up sales and boost the prices of crude oil.

OPEC

The organization of Petroleum Exporting Countries is a group of 13 countries that control the major share of petroleum products in the world. The main goal of the organization was to formulate petroleum product related policies. Their main objective is to secure fair rice for petroleum for its member countries. Over the years, OPEC has undergone many reforms and changes to keep up with the growing demands of the world. The market has stayed relatively stable apart from a few years where prices tend to crash.

Cut In Oil Production

The OPEC or the recent OPEC+ group has sought to cut down on oil production by almost 20% over the years. This decision was made back in 2016, when in lieu of spiraling oil prices, the OPEC nation sought to cut down production to control the price from falling. According to the mandate, the OPEC+ countries, led by Saudi Arabia sought to cut down their Oil production by almost 20 million barrels per day. This is a significant reduction in Oil production.

Other reasons for countries reducing oil production is the shift towards sustainable sources of energy. The future cars and bikes would be driven by electricity over petroleum. We are still few years away from complete petroleum independence, but at present, petroleum is still an important part of our lives.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes