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April 7, 2020

Covid-19 triggers collapse in oil demand and prices

By JP Casey

The sudden spread of Covid-19 has plunged many of the world’s oil production centres into limbo, with closures and uncertainty in China leading the way. According to Carbon Brief, the percentage of oil refineries in operation in the province of Shandong fell from 71.4% in December 2019 to 38.9% two months later, a collapse of close to half that is symbolic of a wider sudden industrial outage. Similarly, government figures have shown a 3.3% decline in crude oil processing in the first two months of the year, compared to the same period in 2019, and a 6.6% fall in the production of refined oil.

This decline in production has precipitated a near-identical decline in oil prices. Figures from Trading Economics show that the price per barrel of oil has collapsed in the last four months, from a peak of $64.58 on the fifth of January to a low of $20 on the first of April. This drop has been hastened by two periods of significant declines: a fall from $47.80 to $30.16 between the fifth and ninth of March, and a fall from $33.33 to $20.23 between the 13th and 18th of March.

Read more about the impacts of Covid-19 on the offshore industry here.

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