TEHRAN, Iran, April 22
Trend:
While coronavirus spread has caused a decline in global demand for crude oil, some oil producers increased production, which has led to unprecedented collapse of oil prices, Iran's Oil Minister said.
"The crisis due to coronavirus has sharply reduced oil products' consumption in the aviation and road transportation industries; therefore, the gasoline consumption also declined and refineries have reduced their production, too," said Bijan Zangeneh, Trend reports citing ILNA.
"The OPEC estimated that crude oil supply would increase by 3 million barrels per day in the first three months of the year; in the meantime, because of coronavirus spread, there was a drop by 11 million barrels in demand for oil during the past three months," the minister said.
OPEC and the other oil producing countries agreed to cut production by 10 million barrels a day, which is about 23 percent of their production levels, in May and June.
"Unfortunately, amid the coronavirus outbreak, there was a conflict over the price of oil. Some countries started to increase output, and this caused a severe crisis over oil prices in the market," the minister said. "An agreement was reached to reduce oil output by 10 million barrels per day from May, but instead, some oil producers have increased output and supply thus, creating more tension in the market."
"If the output cut of 10 million barrel per day is completely implemented in May, the supply in the market will decline, and this eventually will have its effect. The important thing is that the market should react considering the current situation," Zangeneh added.
"However, the market players did not consider this volume sufficient due to uncertainty of the reserves and since the end of coronavirus crisis is unknown," the minister said.
The price of West Texas Intermediate (WTI) benchmark crashed at -$37, and the panic had spread through markets, with Brent crude oil prices plummeting by over 20 percent to $18 per barrel.