The contact restrictions around the globe have led to a decrease in the consumption of crude oil. A large part of the crude oil produced worldwide comes from OPEC countries. These countries depend mainly on the sales revenues from the black gold with their national budgets. The largest producing countries currently include the USA, Saudi Arabia and Russia. In the period before the Corona Pandemic, these countries each produced around 10 barrels (159 litres) per day. At a price of USD 65.00 per barrel, this means that the daily sales revenue was around USD 650 million. The price of WTI today costs around USD 21.50 per barrel, which at the same production rate only corresponds to sales of USD 215 million per day - the cuts are significant.
Sell or store?
The groups like
BP (NYSE: BP), Royal Dutch Shell (NYSE: RDS.A) and Total (NYSE: TOT) all have the same problem, what to do with the oil, if nobody can use it in the usual quantity at the moment? Sell it at a low price or store it for a fee and then offer it on the market later? After all, from the producers' point of view, each barrel can only be sold once.
However, some countries or companies have no choice and have to produce and sell at any price because of their liquidity needs.
Oil traders then buy the production and store it if their financial framework allows it.
Secured through the crisis
Then there are companies that have secured their production as a precautionary measure and can watch the current oil price development calmly. The young company
Saturn Oil & Gas (TSXV: SOIL) from Canada recently announced that they have hedged around half of their daily production volume at a price of over 65.00 CAD per barrel until February 2021. The management took the helm at Saturn three years ago and is now building an environmentally friendly oil producer from it.
dynaCERT (TSXV: DYA) CEO Jim Payne was recently appointed as a member of Saturn's Board of Directors. This is an interesting step, as dynaCERT has patented a hydrogen technology that can significantly reduce the emission of pollutants in combustion engines.
Portfolio of tanker companies
There are various tanker companies around the world that are profiting from the current oversupply on the oil market. The listed companies include
Diana Shipping (NYSE: DSX), Frontline (NYSE: FRO), Nordic American Tankers (NYSE: NAT), Scorpio Tankers (NYSE: STNG), Teekay Tankers (NYSE: TNK) and Top Ships (NASDAQ: TOPS). As long as the major oil producers are not able to concertedly adjust their production volume to current global demand, the tanker companies will experience hype.
Who would have thought it is possible that
Tankers will become popular in 2020 and that speculators will be able to move the price of oil futures into negative territory on the expiration date?
CONFLICT OF INTEREST & RISK NOTE
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