Pandemic might not be only factor driving oil prices down – Maltese oil and gas servicing company

Pandemic might not be only factor driving oil prices down – Maltese oil and gas servicing company

pandemic might not be only factor driving oil prices down maltese oil and gas servicing company - Pandemic might not be only factor driving oil prices down - Maltese oil and gas servicing company

The recent news regarding oil prices made headlines worldwide yesterday, but the pandemic might not be the only thing driving down prices, John Naudi, Chief Executive Officer of PB Group (a Maltese oil and gas servicing company) has said.

He explained that these low prices need to be taken in perspective, and said that what has gone below zero are American future contracts linked to a particular delivery date.

“Prices for futures have gone down so low because consumption of oil has come to a standstill. With airlines grounded, cruise liners docked in their port, and the economy grounding to a halt, demand is at a historical low while producers have no more storage facilities to store oil. However, I expect that towards the end of these contracts, the actual price will converge with the physical price of oil which currently varies between 20 and 30 dollars.”

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Naudi however concedes that there might be more than just the current pandemic in driving current prices down. US President Trump’s chances of a second electoral victory this November hinge on his economic success, himself having made the economy a major battle cry of his, Naudi explains.

“Major producers who have been alienated throughout his administration, are eager to push down prices, which they can sustain for a few months.” The same, Naudi said, cannot be said for the more-expensive American shale oil producing companies.

With the US federal government seeking to bailout chunks of the economy, even to the extent of purchasing junk bonds, the current low prices will hit Trump’s efforts hard, and will require further injection from the Federal Reserve, he explained. This argument was particularly evidenced in the past few days with Russia refusing to support recent OPEC production cuts, which seemed an indirect effort to undermine US shale prices.

Looking at the situation globally, John Naudi warned against over-estimating the impact of these prices. “If you look at major stock markets in the Western world in the past days, the oil price impact on share prices worldwide has been marginal. The troubles facing European economies are certainly others”. Asked to delve further on this last comment, John Naudi said that the financial situation of Italy and France should worry Europe most. These two countries are G7 members. They are large economies with huge interdependencies with their wider neighbourhood. In this context, John Naudi calls for a stronger European financial effort to support these two economies, warning that “these are not Greece. Europe must realise that if they go down, many others will go down too.”

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