Low oil prices ‘not great’ news as economies collapse— expert

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Metro Manila (CNN Philippines, April 22) — While low oil prices seem to be beneficial for a time, an analyst expressed worry as the price dip takes place at a time of ‘possible recession’ due to a global pandemic.

JTD Energy Services chief strategist John Driscoll told CNN Philippines on Wednesday night that the dropping of oil prices is “not a great news,” as it unfortunately takes place at a time where economies are collapsing due to the health crisis brought about by the new coronavirus disease.

The Philippines is one country in Asia that is enjoying the temporary benefits of low oil prices as a net consumer and importer of oil.

“When you’ve got cancellations of airline flights, energy consumption is dropping," Driscoll said. "Individuals are living in quarantine; jobs are getting lost. We’re in the throes of a recession, and the possibility of a depression, and in that kind of environment, I don’t think low oil price is such great news."

On Monday, US oil hit a negative territory with the WTI oil trading a -$37.60 per barrel, according to a report by CNN International. This was the first negative close in history.

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Driscoll said this scenario is unprecedented -- something oil companies have never seen before.

“We’re going to see pressure on the price," he said. "Those high-cost producers in the US, in the deep-water areas, offshore frontiers, they’re gonna be forced to shut in. If there’s no place to put the oil, the only alternative is to cut back supplies."

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Despite the dilemma of refineries running out of places to store oil, Driscoll said it is still far-off for oil companies to give away their products for free.

“I don’t think that we’re going to see it just yet," he said. "Remember that oil companies, refiners, are in the business of buying crude oil, processing it, making products and marketing that at the pump, and that incurs costs.”