Posted on Oct 27, 2020
The present year has been so turbulent for the oil industry that some believe there could be permanent consequences. While industries of all kinds have felt the effects of the COVID-19 pandemic, the impact on oil and gas has felt different.
In this sector, we saw an industry essentially grind to a halt. And though there has been at least a partial recovery over the course of the year, the possibility remains that irreparable damage has been done.
Frankly this has all been somewhat dizzying to keep track of for those who may be invested in oil, or who may have broader interest in the energy sector. So to clarify things as we approach the final weeks of 2020, we’ve written up a timeline of the major events that have befallen the industry throughout the year.
Wuhan Locks Down (23rd January)
It seems almost strange to think all the way back to January of 2020, when most of the world was only just beginning to learn about a strange virus emerging in China. But the initial COVID lockdown did take place back on 23rd January in Wuhan.
This event in and of itself had little to ado with the oil industry (though locking down an industrial city of 11 million people does impact demand). But it did mark the beginning of the sequence of events that would soon cripple the oil trade.
WHO Declares a Pandemic (11th March)
The WHO officially declared COVID-19 to be a pandemic on 11th March, which essentially confirmed our worst fears about the virus. By this point there were already troubling signs in the oil industry, but the full scope of the problem was not clear, and there were hope that the virus could still be marginally contained in select parts of the world.
The pandemic declaration was a harbinger of intensifying struggles soon to come.
OPEC+ Cuts Production (13th April)
Once the pandemic truly struck, demand for oil around the world dried up. People stopped commuting, industries stopped functioning, and there was virtually no need for oil and gas as compared to ordinary times.
This led the world’s leading oil producers — often described as the OPEC+ nations — to convene in an attempt to protect their industry. The result was a cut in oil production of 9.7 million barrels per day. The agreement was set to last through April off 2022, with cuts slowly lessening over that span of time.
Oil Goes Negative (20th April)
Without having had time to respond to the agreed-upon production cuts (which didn’t take effect until 1st May), the price of crude oil dipped into negative numbers on 20th April. This was unprecedented, and while it was far from the first sign that the industry was in serious trouble, it served as the headline that blew up the story. This was what led to persistent discussion about whether or not the oil industry still had a future.
OPEC+ Extends Production Cuts (6th June)
On 6th June, the same nations that agreed to the aforementioned production cuts agreed to extend them at a similar rate through July. This was a response to some cautious optimism about the effects the May production cuts had had on the industry, and signified an international effort to continue supporting recovery.
With numbers now in for the first half of the year, we know that leading oil companies around the world cut the value of their assets by nearly $50 billion in the effort to slash production.
Oil Tops USD 40 (21st June)
Perhaps the clearest sign that recovery efforts had a positive effect is that the oil trading charts took on an impressively stable look beginning in late June. It was on 21st June specifically that the price per barrel of crude oil topped USD 40 for the first time since before the pandemic, and it would continue to trade near this price throughout the entire summer.
In ordinary times, USD 40 for a barrel of oil would not look strong. But in the context of 2020, it was an encouraging threshold for oil to reach and, for the most part, maintain.
European Lockdowns Resume (20th October)
Since the end of summer, those oil prices have become somewhat less stable, and this appears to coincide with renewed concerns about COVID-19 spread.
As of late October, new lockdowns were imposed across Europe, and the United States also began to see escalating case counts. These issues have not had an impact on the oil industry just yet, but there is every possibility that decreasing demand brought about by fresh lockdowns could result in more trouble.
Given this last point it’s clear that this timeline is not yet complete. Before the end of the year there could be additional developments relating to demand and efforts to protect the industry. But the events and reactions outlined above give you a sense of just what oil’s turbulent 2020 has been like.
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