It has only been a few months since Guyana started producing oil, and already global events have sent the price for oil plummeting to unprecedented depths on the world stage, although a Norwegian research company expects Guyana to remain untouched by production restrictions.
A chart showing the fluctuating price of Brent crude over a three-month period
As of Monday, oil was trading at US$34 per barrel – a steep drop as it was only a day ago being traded at US$48. Brent crude was being traded at US$66 per barrel when Guyana first started oil production in December 2019.
Rystad Energy, a Norway-based research company that has written extensively on Guyana’s oil sector, has projected that the situation will get worse. According to the company in a recent missive, the spread of the coronavirus has dealt a blow to the global demand for oil.
It noted that in February of this year, the demand for crude dropped by 4.6 million barrels per day. China, where the coronavirus had originated, made up 2.9 million barrels of this cut to demand.
There has also been talk of the Organisation of Petroleum Exporting Countries (OPEC) reaching an agreement to cut production. A recent meeting resulted in no major consensus being reached on how to deal with the issue.
“Rystad Energy’s pre-coronavirus global oil growth estimate was 1.1 million bpd for 2020, which we later slashed by 25 per cent last month. Our data now point to a much more pessimistic outcome, with growth likely to fall to merely 500,000 bpd, and this is assuming that the COVID-19 epidemic will largely be contained by the end of June, which in turn implies a further downside risk,” the Rystad report also stated.
After discovering 1.8 billion barrels of oil equivalent last year, Guyana took first place for the most discoveries for 2019. While price shocks from oil on the world stage could have implications for Guyana, Rystad believes that Guyana’s supply will remain untouched.
“Rystad sees supply continuing to surge in countries that are not bound by any production quotas – namely in the US, Brazil, Norway, and Guyana,” Rystad had also explained in its missive on the issue.
Back in December, the Department of Energy had revealed that Guyana’s first three lifts of one million barrels of oil each would be sold to Shell. Shell was chosen ahead of companies like Exxon, CNOOC, Hess and BP, all of which bid for the oil. But since the oil would be sold on the spot market, there have been questions as to whether Guyana would earn less money for the oil.
This announcement was immediately criticised by Opposition Leader Bharrat Jagdeo, who has also said that companies who participated in this process could be barred from doing business in Guyana should his party be elected. In addition, Auditor General Deodat Sharma had said in sections of the media that his department would look into the transaction.
In defending the decision, the Department had said that at the end of the process, Shell had the most competitive yet secure pricing.
Meanwhile, the Dow closed on Monday down more than 2000 points after a dramatic day of trading which saw the markets close briefly because stocks were free-falling chaotically.
At the closing bell, the Dow was down by 2025.32 or 7.83 per cent, which was worse than the figure that had forced trading to a halt earlier in the day. It signals the worst-ever point drop for the index. According to media reports, it was the worst day of trading on Wall Street since the global financial crisis in 2008, with the oil prices plummeting and the futures market also suffering astronomical losses.
