The UK Benchmark
The UK benchmark for oil has reduced by more than 10%, and it appears the day after the demand of West Texas Intermediate fell below zero for the first time in history. This West Texas Intermediate is a benchmark for U.S. oil. This fall is an important illustration of how much the world economic activity has slowed worldwide.
Demand and prices have reduced sharply due to the combination of disturbing events that are triggered by the lockdown. Now, there is a possibility of a worldwide shortage of storage space for oil.
On Tuesday, the energy ministers from the Opec, along with other oil-producing countries, set up a conference call to talk on the collapse, none of them agree on any new measures to cut the supplies.
The Storage Issues
James McNally of the Third Bridge Group said that it was an exceptional demand fall, and no one in their lifetime had seen anything like that situation. Storage at the U.S. oil hub, Cushing, has grown more than 15 million barrels already and is hopeful of the capacity.
Adam Vettese, an analyst at eToro, said that the virus was rewriting the rules and policies of the global economy in front of their eyes.
The future of petrol – will the price fall or increase?
The price of petrol is actually related to the price of oil, and of course, it is driven by competition. It means that the payment the motorists do isn’t related to crude directly. Instead, the suppliers control the demand.
Importantly, a key factor that affects the demand of the fuel is that the greatest proportion of the cash anyone hands over for a litre of petrol in the United Kingdom goes to the government in the shape of tax. The fuel duty is charged at 57.95p in each litre.