Mohammed R. Ishaq

The World Implications of Falling Oil Prices:

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The World Implications of Falling Oil Prices:

By: Mohammed R.Ishaq

 Volatility and instability has always been a challenging element of oil market but has rarely been more extreme than it is today. There are many reasons led to falling oil prices but the most important factors of this falling are:

1- COVID-19 (coronavirus) implications that led to low oil demand combined with its dramatic impact on financial markets, have led to fast price swings, with coronavirus outbreak, oil prices plunged largely as result of low oil demand, which was reflected on low of global growth about percentage point this year compared with economical prospects in November 2019. With coronavirus outbreaks to more countries, price of oil largely plunged with weak global demand; this negative impact led to loss of confidence in the global financial markets in addition to tourism and traveling sector, as well stock declined of oil giant like exon and chevron, while Smaller oil producers that works in drilling platforms reduced jobs to prevent coronavirus approaches it’s production operations. China is larger consumer of energy in the world its formed more than 80% of world rising for oil demand in 2019, therefore low oil demand because of Coronavirus had effected negatively on oil prices. 

2- Oil prices war between Saudi Arabia Kingdom and Russia, Arabia Saudi started a price war by oil market, after about four years of negotiations between “OPEC” and producers outside “OPEC” especially Russia to reach a satisfactory price for producers, but Russia refused “OPEC” request to continue reduce production, Riyadh announced sell its oil production in world market for 33$ per one barrel for about 30% reduction. 

Saudi Aramco has pledged to provide about 12.3 million barrel daily(tremendous increasing), And this new rising according to Bloomberg agency report is more than 25% higher than rate of past month production, this new high put Saudi Aramco above its sustainable maximum capacity; this is refer to the Kingdom use its strategic reserves to flood the market greatest possible of crude oil.  

In return Russia Minister of energy said that his country has the capacity to increase the production for about 500 thousand barrel per day, that make the possible production of the country reach to 11.8 million barrel daily. 

Falling of oil prices carry many of negative implications on economies and plans of exported countries, falling of oil prices have  an impact to reserves of Gulf Cooperation Council countries, financial markets 

Was affected largely in gulf countries because of low oil prices, therefore the stock exchange was recorded a major loss in this countries. Kuwait exchange stock had reduced about 10%. While Dubai index reduced to 9% and Abu-Dhabi index reduced to 8%, Qatar index reduced to more than 9%, in Amman and Bahrain more than 4% and Amman index reduced about 2.8. 

 Russia lose as a result of its decision not to low production daily between 100-150 million Dollar, till 40$ for one barrel, with russia exports for about 5 million barrel daily. the major importing countries will benefit, like China, India, Germany of low energy bills, while the consumers generally will benefit of low oil prices.

Edited by Mohammed R. Ishaq

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