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1 1 (March 26, 2020)

handle is hein.crs/goveawr0001 and id is 1 raw text is: - Congressional aResearch Service inforrming the legislative debate since 1914_ Low Oil Prices: Prospects for Global Oil Market Balance March 26, 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, are creating 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 consumers, 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. Additionally, the International Energy Agency (IEA) and the Organization of the Petroleum Exporting Countries (OPEC) have jointly expressed concern about the welfare of citizens in developing countries that rely on oil revenues. Market balance-supply minus demand-is one 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 imbalance could be as high as 12 Mbpd in the second quarter of 2020 (see Figure 1). Prolonged oversupply periods at this level could test petroleum storage and logistical limits and could further depress oil prices. Congressional Research Service https://crsreports.congress.gov IN11286 CRS INSIGHT Prepared for Members and Committees of Congress -

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