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South Africa: Oil Markets Were Among the Great Disruptors of 2020

The BIG disruptor, of course, was a certain virus that wreaked havoc with the global economy. But the response by some markets and sectors of the economy to the ‘Great Lockdown’ was more disruptive than others.

First published in the Daily Maverick 168 weekly newspaper

Global oil markets stand out in this regard. In April, futures contracts for West Texas crude plunged into negative territory for the first time, fetching close to minus $40 a barrel. This was a buyer’s wet dream – sellers were paying them to take the barrels off their hands. Think of the classic O. Henry short story The Ransom of Red Chief.

Buyers were only briefly paid to acquire oil, and the price in December broke through $50 a barrel – as in that was the price that buyers had to pay sellers – but that underscores the wild ride that oil markets have taken this year. And it is a ride that has sloshed through the pipes of the global economy, potentially reshaping it for decades to come.

In November, global consultancy PwC forecast in a far-reaching report that global oil demand would “never again exceed 2019 levels”.

“Spurred on by the Covid-19 global…