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1 1 (April 17, 2020)

handle is hein.crs/govdacr0001 and id is 1 raw text is: i% 'N\ r M.. . , , , . \ g e, Low Oil Prices: Prospects for Global Oil Market Balance Updated April 17, 2020 Reduced travel, slowing economic activity, and petroleum-product demand suppression related to the COVID-19 outbreak, combined with announced plans to increase crude oil supplies, created expectations of an imbalanced and significantly oversupplied near-term petroleum market. Oversupply expectations have contributed to oil prices declining nearly 60% since January. Some regional oil prices have been less than $10 per barrel. While low oil prices are generally positive for consuiners, current price levels are causing financial stress for the U.S. oil sector and several policy options could be explored that might provide some degree of relief. Market balance-supply minus demand-is onec important factor that influences oil prices, refinery crude oil acquisition cost, and the price of consumer petroleum products (e.g., gasoline). Oil market characteristics-generally inelastic supply and demand in the short term-can contribute to market conditions that could result in volatile price movements (both up and down) when supply and demand are imbalanced by 1 to 2 million barrels per day (Mbpd) for a brief or extended period. Preliminary projections-subject to revision-indicate that global imbalance could be as high as 15 Mbpd in the second quarter (2Q) of 2020 (see Figure 1), including the Organization of the Petroleum Exporting Countries (OPEC) crude oil production agreement (see details below) that takes effect in May. Prolonged oversupply periods at this level could test potoleum storage and logisucal limits and could further depress oil prices. However, current projections-that include uncertain assumptions about demand recovery-indicate that balance could move to an undersupplied state as early as 3Q2020. Congressional Research Service https://crsreports.congress.gov IN11286 CRS }NStGHT Prepared for Members and C om m ittees ootC ongress ...........................................................................................................................................................................................................

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