The current price of WTI crude oil at the time of this article is $20.39 per barrel. WTI stands for West Texas Instrument and is a grade of crude oil commonly used as a benchmark for the market price of crude oil. The last time oil and gas prices fell to the $20 per barrel price point was more than 20 years ago. The price of crude oil continues to plummet and is predicted to dip as low as $10 per barrel before all is said and done. Oil and natural gas prices have certainly been greatly impacted by the COVID-19 pandemic, but there are also other factors at play as well. In today’s blog at Northern Oilfield Services, we talk about the oil market, the coronavirus’s impact, the supply problem, and more.
Oil and natural gas prices have always bounced back. Oil well investment prices are bound to be low, so now may be a good time to start your oil well investment before prices jump back up. Whether you need help maintaining your wellhead, need rental equipment, or are looking to purchase drilling equipment, Northern Oilfield Services has what you need. Contact us today to learn more.
Coronavirus Impact
In March, almost the entire world shut down. Travel has been restricted, and many governments recommend only leaving homes if it is completely necessary. This was absolutely the right call, but it was not without its consequences. Clearly, the economy as a whole has taken a big hit — many have lost their jobs and with everything closed down, people are only spending money on the essentials. This has had a major impact on the restaurant industry and the oil and gas industry in particular.
Remember supply and demand from high school economics class? Now is the time your schooling will pay off. It’s pretty simple — even if you skipped out on econ class. With travel bans, stay at home restrictions, and everyone who can work from home working from home, consumer demand for oil has drastically decreased. There are significantly fewer flights, less travel by car, and more. With the demand decreasing, the price of wellhead investments and crude oil decrease as well. This explains a large portion of the price drop in crude oil and wellhead investments, but not all of it.
Pricing and Production Conflicts
The other factor responsible for the drop in crude oil prices is actually the supply portion of the supply and demand model. Not only were many countries keeping the production (supply) of oil steady, they were actually increasing their overall oil production. Traditionally, OPEC is responsible for creating guidelines to limit the production of oil. OPEC is a counsel composed of 13 oil-producing nations that help to regulate the production and exportation of oil. The previous agreement for oil production was set to expire at the end of March 2020 and no new agreement had been reached. The deal expired and all oil-producing countries had no oil production limits again until Sunday, April 12th, where Russia and other oil-producing countries agreed to cut production by 10 million barrels per day temporarily. While this may sound like a lot, it is not anywhere near the amount that demand has dropped to and it is only a temporary agreement.
Overall, this translates to the supply of oil not being cut nearly enough to meet demand needs. This is creating a large oil surplus, contributing even further to the drop in prices to oil, natural gas, and oil well investments. The price of oil will likely continue to fall until production is cut further or the demand for oil increases. The demand for oil and gas will sharply increase as countries around the world start to open up, but it may be some time before the market returns to more stable pricing.
If you are taking advantage of the low prices of oil well investments in hopes the market value of oil will dramatically increase in the coming years, Northern Oilfield Services can help. We offer oilfield services like wellhead maintenance, fracking and drilling equipment rental, and equipment sales. Contact us today to learn more.
Oil Prices Over the Years
Oil and gas prices have fluctuated greatly over the years. Like many other commodities on the market, oil and natural gas rise high and fall low due to the political landscape, production rates, demand rates, and other external factors. One thing has always been certain historically, though: prices always come back up. As long as people need to travel, oil will live on. For the foreseeable future, people will need fuel for cars, airplanes, and other methods of travel. This makes oil well investments and oil, in general, a worthwhile investment long-term. There will always be peaks and valleys in the market. As long as you are prepared and adaptable, oil well investments can be very profitable.
For example, in 2002, the price of crude oil dropped to below $30 a barrel after being more than $50 per barrel just two years earlier. For those who hung in there and made oil well investments during this turbulent time, the profits were enormous. Four years later in 2008, prices soared above the $160 per barrel mark. The oil well investment market has peaked and valleyed for years. If you know what to expect and how you can be prepared, you can thrive in this industry.
Northern Oilfield Services
At Northern Oilfield Services, we have been faithfully serving the oil and gas industry for years. We offer reliable wellhead maintenance, affordable oilfield equipment rentals, and oilfield equipment sales for those who need it. Whether you are a seasoned veteran in the oil and gas industry who needs help with maintenance and upkeep or are a newer oil well investment in need of quality fracking and drilling equipment, you can trust Northern Oilfield Services. Contact us today to learn more and to get started with your oilfield services!