Tracking Changes in the Macroeconomic Fundamentals of G20 countries due to their Major Announcements

The ongoing coronavirus pandemic has had an intense effect on the oil economies. It’s led oil prices to plunge and reverse all the boom they’ve seen in recent months. Global oil demand has fallen largely as a result of reduced air travel, lower industrial activity and lower domestic demands for refined products. India, being a major importer of crude oil, saw a 70 percent slump in its demand. Even if the demand were to regain, it would take time to come to the pre-virus levels. Historically Petroleum production in US started after the discovery of oil in Pennsylvania in 1800s however, it started coming up big in oil production since 2016. During that time Russia and Saudi Arabia joined hands to work together in creating a price floor and restricting their production to maintain the oil prices. According to a CNN, Business report dated 12th September 2018, US was declared as the largest producer of oil owing to their shale oil boom. Subsequently it recorded the highest extraction of 4.46 billion barrels of crude oil in 2019. In the later months of 2019, the deal between the two larger players fell to shambles. This was on account of refusal by Russia to cut the production further. When the Wuhan-virus hit the world and threw it in a slump, global demand of oil plummeted as air travel took a halt. This caused the oil prices to fall sharply.It is then, when Saudi Arabia decided to cut its production further, to maintain the oil price when Russia blatantly refused. This initiated a price war in March 2020, when Saudi aided in a 65 percent quarterly cut in the oil price, slashing it to almost 8 dollar per barrel, following which US oil price, WTI and Brent saw a fall in the range of 20 to 30 percent. The non-OPEC members playing the role of crude oil exporters fall under OPEC+ alliance including nations like Russia, Bahrain, Malaysia, Mexico, South Sudan, Sudan etc. Russia’s non-co-operation with cutting the oil supply has lowered the OPEC+’s credibility and their ability to aid in oil-price stabilization. Saudi Arabia later issued an ultimatum stating that the OPEC group of which itself was a de-facto leader would cut production around 1.5 million barrels per day. But however low is the demand, production cannot stop forever and in these unprecedented times, the supply will be greater than demand. It is frightening to imagine the fall in the oil prices when the bottom cannot be seen.