After the collapse of the American market … What awaits the Arab oil-exporting countries?

For the first time in the history of oil markets, US crude futures prices fell to a negative value, despite the recent agreement between OPEC + member states.

While some attribute this collapse to the Corona pandemic and the repercussions of the drop in global demand for oil, others point out that the failure of countries that have not joined “OPEC +” to reduce their production, had an effect on prices.

In light of the recession facing the oil market, it has become necessary to question the possibility that the oil-exporting Arab countries, in particular the Gulf countries, will be affected by this collapse, and over the period. time needed for this sector to recover.

The collapse of American oil

Oil prices in the United States fell below zero for the first time in history, meaning that oil companies are paying their customers to get their products for fear of building up the crude stocks they have over the course of the period. next month.

Demand for oil and its derivatives has declined in recent months due to shutdowns in various countries around the world due to the Corona outbreak and people being forced to stay at home, and work has been halted in many factories.

Oil companies have been forced to hire huge tankers to store excess crude, so companies pay buyers to transport crude out of their facilities to avoid paying more money to store it.

In the United States, the price of a barrel of oil for delivery in May reached -37.63 dollars during Monday’s trading.

As for the delivery contracts for the month of June, the price per barrel only reached 20 dollars. Benchmark Brent crude declined over the same period by almost 9% to $ 26.

In recent months, world oil prices have been affected by two main factors: the decline in global demand and the apparent and declared conflict between the Organization of the Petroleum Exporting Countries “OPEC” and Russia due to differences. on the volume of daily production.

And earlier this month, OPEC members and their allies finally agreed on a landmark deal to cut daily proceeds by around 10%, the biggest reduction of its kind.

The cause of the failure

Kuwaiti oil adviser Dr Mubarak Muhammad Al-Hajri said: “What happened yesterday in the oil price collapse was due to the speculation that took place on the oil prices in the west. from Texas to the United States of America. “

He added in statements to “Sputnik”: “The contracts for the sale and purchase of oil on world markets are forward. The contracts were made in January at high prices. It was to be sold for $ 60 in next May in light of previous expectations of strong demand. “

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But what happened was contrary to what was expected, there was an increase in supply and a great lack of demand, and an overabundance occurred in world markets which caused prices to plunge, d ‘especially since when the oil was received some refused to receive it because the oil storage tanks were full, prompting producers to reduce their prices until they reached Negative for the first time. times.

Indirect injury

And he continued: “Trump stressed in his speech that he had ordered the opening of federal reservoirs to store oil, and to help producers maintain their stocks, in order to avoid this crisis.”

Regarding the impact of Arab countries, he said: “What has happened is a domestic American crisis, and there will be no direct impact on it, but there will be indirect effects, such as panic. markets, because the oil markets are sensitive to the slightest crisis, or to any drop in prices. “

Asked about the beneficiary of this collapse, he said: “There are no beneficiaries, everyone is a loser, and the loss is great for the May short contracts. As for the June futures contracts, there is concern. also to repeat the same scenario. “

Greatly affected

In turn, Mohamed Ghazali, an Algerian energy expert, said: “What happened yesterday in terms of the collapse in US oil prices, until prices hit negatively for the first time on the market, will have major effects on oil-exporting Arab countries. “

In statements to “Sputnik,” he added: “This collapse will cause major disruption to oil-producing countries, especially Arab and Gulf countries.”

He stressed that “after the passage of the crisis, there will be no recovery in the oil markets as quickly as some predict, it will be slow and the improvement will be slight”.

He pointed out that “the big countries are now trying to think about the post-crisis period, but in the end the market will very slowly return to what it used to be calm, and the oil producing Arab countries will not escape. to this case “.

OPEC Agreement

The countries of the “OPEC +” group have reached an agreement to reduce oil production, in three stages, starting in May and ending in 2022, in a stage described as historic.

According to the agreement, the reduction process in its first phase includes 9.7 million barrels per day from May to June, while the second phase will reach 7.7 million barrels in the second half of this year, and the third phase is 5.8 million barrels until the end of April 2022.