Narrator: The Corona virus
has emptied out cities.
Fewer people are driving
cars or boarding planes.
Factories are idled.
As a result, the world
is burning less oil.
But many of the world's major oil
producers have been pumping more than
ever, leading to a crash in oil prices.
Low prices normally put cash in
the pockets of drivers and fuel
burning businesses like airlines.
But this is different.
Jim Burkhard: "Consumers like low prices.
But in today's environment where
so many people quanarntine.
People cannot benefit from low oil prices.
So there's no winner in
this current situation.
And let's say that the
current bust is so bad.
It can radically reshape the oil market.
Here's how we got here.
Oil producer's most pressing
problem is that a lot of
people don't need its products.
By April, the consumption of
petroleum in the US had fallen to the
lowest levels in at least 30 years.
Demand for gasoline has declined
by nearly half since mid-March.
Jet fuel consumption plunged
by more than 70% since then.
The trend is similar around the globe.
It started in China where the first
of billions of people around the
world began to shelter in place to
slow the spread of the deadly virus.
Fatih Birol: "For 2020, oil demand,
oil consumption will decline.
It increased every year, but decline
because of what's happening in China.
What is happening in the global economy?
This is one reason.
Narrator: By late March, billions of
people around the world were staying home.
Analysts estimate that global
demand for crude oil will decline
by about a third or about 30 million
barrels a day during the pandemic.
Meanwhile, oil is piling
up with nowhere to go.
Pipelines are filling; refineries and
storage tanks, like these, are brimming.
And some oil is being
stashed at sea on ships.
That's because the global pandemic
arrived right as production
around the world was surging.
In recent years, the Saudi led
Organization of the Petroleum Exporting
Countries and other nations, like
Russia, have coordinated production
cuts and tended to prop up oil prices.
They were working together to buoy prices
as US producers flooded the market.
But the truce was short lived.
In early March, Russia and Saudi Arabia
couldn't come to terms on a new round of
cuts and Saudi Arabia turned on its taps.
CNN: "Market turmoil is about
more than just the virus.
Oil prices suffered historic collapse
late Sunday after Saudi Arabia shocked
the market by launching a price
war against one time ally Russia."
Narrator: Meanwhile, US producers
continued to pump even as prices fell.
Us production hit a record of 13.1
million barrels a day in late February
and stayed around there through March.
US companies were reluctant to slow down,
having borrowed heavily in recent years
to drill wells, build pipelines, and
maintain fleets of expensive machinery.
With billions of dollars of debt coming
due, they couldn't afford to stop pumping.
But by late March, already low oil
prices had fallen by more than a half.
And the pain became unbearable.
You can see it in this chart, which
shows the number of drilling rigs
in Canada and the United States.
The drilling rig count declined as
companies cut their budgets in mid-March.
By April US production began declining.
In April, Saudi Arabia and Russia, where
the governments are supported by oil
sales, rekindled their market Alliance.
They convened a group of 23 oil producing
nations who agreed to once again
restrict output and support prices.
They agreed to reduce their collective
output by about 10 million barrels a day.
So far, the market has not been impressed.
Goldman Sachs analyst called it
a historic, yet insufficient cut.
Oil prices fell and trading
opened the next day.
"What's a really fascinating question
for the energy industry for the
oil industry is will this dialogue
between Saudi Arabia, Russia, the
United States, and others, will
endure beyond immediate crisis?
We could be entering a new era of
international dialogue on the oil market
of the like we've never seen before.