Excess volume of crude oil and a severe shortage of storage capacity recently pushed the price of West Texas Intermediate (WTI) below zero for the first time in history, setting off a ruction in the global oil markets that has yet to settle out.
The COVID-19 pandemic, while not the main immediate cause of the collapse in prices, has compounded an earlier price war between major producers, Saudi Arabia and Russia.
For Latin American oil producers, which are benchmarked against Brent Crude prices, the impact has not been as pronounced. However, since early March the price is down 40%, and for much of the last eight weeks has remained below $30 a barrel, the average all-in production cost in the region.
“Everybody is nervous about how long prices will stay this low,” said Anne Milne, head of emerging market corporate credit research at Bank of America in New York. “It’s not going to be something that will resolve itself by the end of this year.”
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