RE: Crude Oil Price - Reasons why the price keeps dropping
The drop in demand appears to be around 20% but because we have a just-in-time delivery network with little capacity for storage, we are now in the crazy situation where oil has been produced and there is literally nowhere to put it. I just find it amazing that that is the impact with just a 20% drop in demand.
I think demand will increase again as the world slowing starts moving again the economy gets going. However, it is going to take time. The rich oil countries have more than enough money to weather the storm but some poorer countries that rely on oil are going to really struggle. I think it will take over a year to get back to full throttle again.
Also, I expect some of the more expensive ways of extracting oil like the shale oil will become economically unviable.
Oil has become the major resource for geopolitics and it has determined economic prosperity. I am really sure that a lot of countries will have issues selling their oils to demanding countries because a lot of countries have stored oil before the recession and as well ordered for more oil. So who will be buying the overflow. Certainly, there will be a drop in oil price in the nearest future.