By Joe Petrowski

Much remains up in the air as the current COVID-19 crisis working its way through society, and the impact of the disease and the recently aborted oil price war on the oil markets have created one of the major uncertainties. Rapidly dropping demand and the brief fight for market have pushed June futures prices below $20 per barrel for WTI and $30 for Brent.  However, oil prices very well could have bottomed, assuming decisions from the April 9 OPEC+ meeting are enacted. For a refresher, OPEC+, led by the previously feuding Saudi Arabia and Russia agreed to oil cuts amounting to 10 million barrels/day in May and June and 8 million barrels/day for the remainder of 2020.

World demand for crude has already been cut to 85 million barrels/day from 106 million barrels/day before the crisis, which is drastic. But production is coming into line because of the OPEC+ agreements, normal decreases from price action and problems from marginal producers. Here is the Supply outlook pre-COVID and today in millions of barrels/day:

Country         Pre-Covid      Today

Saudi & Russia                       22                            12

US                                             14                             11

Canada                                    4.5                            2

Norway                                   3.5                            1.5

Other OPEC                           20                            16

Venezuela                               2                              1

UK                                           3.5                           1

China                                      4.5                           3.5

Mexico                                   2.5                           1

India                                      2                               1.5

Other                                     23                             22

Total                               101.5                          72.5


While not in perfect balance, this is much more constructive to oil price stabilization, with a big upside if we are approaching the peak of the disease. And with significantly less capital investment and falling international rig counts (1100 vs 900 pre-COVID), the market will anticipate a future supply reduction further supporting prices.  Again, much can happen as we see how the initial efforts to open the U.S. and international economies play out. But should things proceed positively, there may be some light shining at the end of the tunnel for the domestic oil industry.


Joe Petrowski

Joe Petrowski has had a long career in international commodity trading, energy and retail management and public policy development. He currently serves as the fuel director of Yesway convenience stores and an adviser to their Chairman on Operations and Merchandising, as well as a director of Xebec, a Canadian manufacturer of Clean technology and Green Print, a carbon mitigation firm. Petrowski previously served as the president and CEO of Gulf Oil LP and was elected to the Gulf Oil LP Board of Directors and then as CEO of the now combined Gulf Oil and Cumberland Farms. He is Managing Director of Mercantor Partners, a private equity firm investing in convenience and energy distribution.