Some of the world’s biggest oil producers have different
break-even points in order to profit off of a barrel of oil.
The difference between the price for Saudi Arabia and
Russia is dramatic. This difference has caused the two
countries to approach the sale of oil very differently.
Russia needs to earn a much higher price per barrel
compared to Saudi Arabia. Because of this, when the
Saudis wanted to stabilize prices by cutting production
further in March in response to decreasing demand;
the Russians wanted to increase production.
As a result, the Saudis increased production by 2.6
million barrels a day and cut the price to their customers
in Europe; a customer base crucial to Russia. This caused
crude prices to drop by 30 percent.
The parties came to an agreement in April. The
agreement was to cut petroleum output.
By the latter half of April, a glut of oil was already filling
storage facilities and oil tankers as the inventory of
supply grew and demand saw significant drops.
From April 20 to April 22, 2020, the price of West Texas
Intermediate crude slumped into negative territory for
the first time in history. It actually hit negative-37.63
per barrel in U.S. dollars. On April 21, Brent Crude sat
The oil industry felt the impact of the global economy
contracting by 4.4 percent and the first wave in
the pandemic hit oil producers hard; especially U.S.
The oil futures curve began to take on a new shape
by November as the prospects of a coronavirus vaccine
looked much more promising. A future with a return
to manufacturing and many more drivers on the roads,
provides hope that any over-supply will be quickly
depleted and prices can rise. Crude oil prices jumped
about 20 percent during the month.
A weaker dollar also helped to buoy crude. Another
factor that helped support higher prices was an attack
on a Saudi Aramco fuel distribution center in Jeddah,
although the Saudi’s said it would not affect output.
Small Rise, but Still Low
The price of a barrel of oil edged up slightly. On
December 7, 2020, Brent Crude, one of three primary
benchmarks, sat at 48.79/barrel.
Because of rebounding demand in China, the country
is drawing down its domestic inventories.
Some of this hope has been dashed with the postThanksgiving surge in COVID infections in the U.S. and a return to shut-downs.
Despite some increases in oil prices, holiday 2020
Christmas travelers are finding gas prices 20 percent
lower than year-ago prices. A bit of good news during
a year sorely lacking in good news.
Many industry experts believe that it won’t be until 2022
before demand returns to pre-pandemic levels globally. In
the U.S., where 85 percent of domestic supply comes from
fracking and horizontal drilling, the demand will depend on
the length and severity of the second wave in the pandemic.
Aside from oil, starting in October, the demand for natural
gas increased as it does annually.
The good news is that as of mid-December, U.S. crude
production hit its highest level since March. Since electric
cars are projected to only account for two to three percent
of the total U.S. car fleet by 2030, the demand for oil is not