Real winners and losers of oil price crash

Many oil producing countries will lose huge revenues 


One can wonder that how there be losers and winners when oil prices crashed. Even when the oil prices are historic low and some oil companies facing the possibility of bankruptcy but there still are winners in this situation. Generally -it is believed that oil producing countries are the real losers when the oil prices plunges. And the big consumers of oil are the real winners. Lower oil prices helped the biggest consumers of oil to reduce the import bill. But it seems that the situation is different this time around.    
The lockdowns and travel restrictions imposed by different countries have decreased the use of fossil fuel. Very few people are traveling and using their cars and other vehicles. The coronavirus outbreak in Europe and North America has severely impacted the economic activity and production.
In this unprecedented global oil glut, some sectors of the oil industry and some oil-producing countries and their national oil companies (NOCs) are set to fare better than others-some energy policy experts believe.  Like in every extreme market situation, there will be big winners and big losers while the oil industry is scrambling to stash crude oil and refinery products that no one really needs right now.

The real losers
The real losers in this situation would be the large oil producing countries with lower storage capacity. They will be forced to sell oil at the lowest prices or to stop the production of oil. The real winners would be the countries and companies with big storage capacity. They will buy the cheap oil and then store it to sale in the future when prices will go up.

Renowned energy writer TSVETANA PARASKOVA wrote in oil price .com that The OPEC producers who don’t have adequate refining capacity at home and don’t have solid long-term oil supply contracts with oil-importing nations are set to lose the most. These are Angola, Nigeria, and Iraq. OPEC’s second-largest oil producer Iraq sells most of the crude it produces.
Venezuela will be another loser in this situation as it will lose revenues from oil. The low prices will not bring enough money for Maduro government to steady its ships.
To be sure, Saudi Arabia also does that. However, in recent years the top producer in the OPEC and the world’s largest oil exporter have struck deals with the world’s top oil importer, China, ensuring long-term demand for its crude in the market.
The countries that have long-term oil supply contracts with importers will be better off than those who rely more on spot crude sales. Data about the global spot crude market is incomplete. But oil-producing nations with higher shares of spot sales would likely feel the pinch from the storage capacity crunch much harder than others because amid the huge oversupply refiners are even trying to get out of some clauses in long-term contracts, let alone snap up spot cargoes.
Refined product distributors will lose the most—people are not driving and are under lockdown in many countries in the world, including in India and the largest oil consumer, the United States.  
Biggest winners
The owners of super tankers and big storage capacity are the real winners.  The biggest winners in the current market situation are the owners of storage capacity—onshore and offshore. Storage has been the most sought-after ‘commodity’ in the energy market in the past month as demand was crashing, and supply was rising.

Offshore, traders are scrambling to book floating storage, and charter rates for supertankers are skyrocketing. Storage costs are rising, and so are costs for chartering tankers to store oil at sea for future sales when traders expect demand to recover from the pandemic-hit plunge. 
CHINA benefits from lower oil prices as a major importer, but this time it may take a while for the effects to materialize: It already has high stockpiles of oil and liquid natural gas, while the coronavirus is hindering travel and manufacturing and creating uncertainty.

Under those circumstances, excessive volatility in the markets may hinder China’s economic recovery, as it needs stability across the globe to prevent further shocks to supply chains. Those concerns were on full display.
The dramatic fall in oil prices also could have political consequences for friendly countries ranging from Iran to Venezuela -- a headache Beijing doesn’t need.

INDIA, the world’s third largest crude consumer, should be among the big beneficiaries since its import bill will fall significantly. Cheaper oil could also help Prime Minister Narendra Modi’s government by allowing it to increase taxes on fuels, rather than pass the entire benefit of the price decline to consumers. This couldn’t come at a better time for Modi, whose government is under pressure over slowing growth and the biggest bank failure in India’s history.


Lower oil prices are also generally good for resource-poor JAPAN, with cheaper gas helping consumers hit by a crisis of confidence over the coronavirus and a damaging sales-tax hike. It means lower costs for businesses as well, potentially supporting profits through a looming downturn.
It is generally believed that low oil prices hurt the oil producing countries as they depend on oil exports to generate much needed revenues. Their economies suffered and they face financial crunch when oil prices fell beyond a certain point. Now the oil prices have gone below the $0 per barrel in US. The oil prices have fallen to lowest levels never seen before.

If the prices of fossil fuel remain at lowest levels for longer than the economies of Iraq-Russia-Saudi Arabia and other oil producing countries will be hit hard. They will lose precious petro dollars.  
The two factors have mainly contributed to crash of oil prices. One is the lockdowns because of coronavirus reduced the consumption and thus the demand. The second is price war- major oil producers pumped more oil in the market that created oversupply. When big oil producers realised the situation and decided to cut back the supply it was too late.   OPEC and its Russia-led allies promised to remove 9.7 million bpd from the market starting in May. 
                                                      Khalid Bhatti

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