For the first time in history, the US oil price turns negative as producers are now paying buyers to take their stock, as they fear that storage capacity would run out by May. This persisting turmoil has lead to the oil price, falling to an 18- year low.
As lockdowns across the world are keeping people inside, the demand for oil has fallen drastically. This has left oil firms with no choice but to rent tankers to store the surplus, and that has forced the price of US oil dip to negative.
The pain in oil markets is carried over to stocks, with Asian and European indexes, and US stock futures, all in red as on April 21.
The West Texas Intermediate (WTI) oil futures expiring in May, witnessed a steep fall in price from the benchmark set for US oil, as low as minus 37.63 dollars a barrel as on April 21.
How it all began?
On April 20, the oil price slumped drastically, partly due to the technicality of the global oil market. Traders were keen to offload the holdings to avoid having to take delivery of the oil and incur storage costs.
The oil industry has been striving with both decreased demand and in-fighting among producers about reducing output. Earlier this month, OPEC members, Saudi Arabia and Russia, finally agreed to a record deal to slash global production by about 10 per cent. The deal was the most massive cut in oil production ever to have been accepted. However, it failed to convince traders that the supply glut will ease any time soon.
Furthermore, analysts say the cuts were not big enough to make a difference as the world has more crude oil than it can use. They noted that this cut would only be reflected in May.
Until the lockdown is eased, this issue will prevail and will cause a further fall in price. The bouncing back of the global economy and the oil market will depend upon how the health crisis unfolds.
The black gold is now a curse.
Oil has been known as the black gold since ages. The main reason behind this was, as when the price is high, the revenue from oil keeps the companies and governments which depend on it run smoothly.
However, looking into the current scenario having oil can be a curse rather than a blessing.
The countries which were heavily dependent on their oil production for fuelling their economy are struggling to survive due to the decline in oil price.
Impact of oil market turmoil on India
Indian stocks opened weak as on April 21, slipping over 3 per cent, which is in line with the performance of the US Dow Jones overnight. As on April 22, crude oil price fell below zero for the first time in history, causing the oil market to tumble further.
As per experts, the efforts to ramp up the global economy is a challenging task, as the lack of employees plus the drop in demand may hit the industrial activities heavily.
Kotak Institutional Equities said the recent steep decline in spot and one-month forward prices of WTI and other landlocked crude in the US exhibit perils of the storage limits amid a sharp drop in inland demand and high, albeit gradually moderating, production.
Experts say that India can’t have a better opportunity than now to fill its storage capacity with cheap crude oil. However, what is challenging for India is to ship the oil to storage facilities before the monsoon breaks.
India Strategic Petroleum Reserve (SPR) is only 37 million barrels that are equivalent to 13-16 days usage at the current rate of consumption.
Besides, each cavern can take only a specific grade of crude so that consistency is maintained. Though India has only 5.33 million tonnes (mt) of SPR capacity across three locations — 1.3 mt at Visakhapatnam, 1.5 mt at Mangaluru, and 2.5 mt at Padur (Karnataka) – what is crucial is to make full use of this cheap oil opportunity while it lasts.
How oil price dip has affected other countries?
In early March, the International Energy Agency (IEA) had warned that the collapse in the oil price would affect the revenue of the “vulnerable” producing countries by 85 per cent. The Paris-based agency stated that the coronavirus global lockdown and the unstable oil war between Russia and Saudi Arabia are the primary reasons.
Furthermore, IEA warned that Ecuador, Nigeria, and Iraq could be worst hit, with earnings falling by between 50 per cent and 85 per cent – and that was assuming oil prices of 30 dollars a barrel. Currently, it’s less than 20 dollars a barrel.
The IEA added that OPEC members such as Algeria and Angola were also at risk because of their high dependence on oil and gas revenues.
In a special report on the crisis by IEA, it further stated that many countries were less prepared this time to respond over a crude oil slump than the 2014 decline in price.
As per the agency, Iraq will be the worst hit as fuel accounts for 98.5 per cent of Iraq’s export earnings (gems, precious metals, fruit, and nuts make up most of the rest). Iraq will now face a monthly 4 billion dollar budget deficit even to meet civil servants’ salaries and pensions and is likely to face further pressure on its health service.
The agency also pointed out that Nigeria’s economy is less prepared to tackle a “price shock” than five years ago, because per capita GDP has shrunk by almost a third.
Fatih Birol the Executive Director of the International Energy Agency on April 20 tweeted suggested three ways to tackle the drop in oil demand.
We continue to see extraordinary turmoil in oil markets in this "Black April" for the industry. The OPEC+ supply cut is a solid start but insufficient to rebalance the market immediately due to the scale of the drop in demand.
— Fatih Birol (@fbirol) April 21, 2020
If the global lockdown further extends, the world will move from the predicted recession to depression. It is now a choice between life and livelihood for many countries.
Escalation Of COVID-19 Cases Across The Globe
The United States, India, and Brazil have the most confirmed cases, followed by France, Russia, the United Kingdom, and Turkey. There are very few locations that have remained undisturbed.
Since the middle of last year, confirmed cases have been increasing. Although the actual scope of the first outbreaks in 2020 is unknown because testing was not generally available at the time. The 100 million COVID-19 cases were discovered at the end of January, over a year after it was first diagnosed. As of 6:30 p.m. CEST on July 30, 2021, WHO has received reports of 196,553,009 confirmed cases of COVID-19, with 4,200,412 fatalities. A total of 3,839,816,037 vaccination doses has been delivered as of July 28, 2021.
After reaching a record high of over 0.9 million cases on April 28, 2021, new daily instances of the coronavirus continued to decline, reaching a low point on June 21, when over 0.3 million cases were reported. Since then yet, there has been a global increase in cases. On July 15, 0.53 million daily cases were reported, and over three million new cases were reported in the second week of the month. As of July 15, 188.9 million patients have been recorded worldwide. The transmissive Delta form accounting for most infections in 111 countries. Most instances were recorded in Brazil, India, Indonesia, the United Kingdom, and Colombia in the last week. With the steepest increases in Zimbabwe (72%), Indonesia (44%), the United States (38%), Bangladesh (35%), and the United Kingdom (30%). Many Asian nations, including Vietnam, Malaysia, South Korea, and Japan, have reported many daily cases. However, the spread was under control.
The number of new cases in Indonesia has been on the rise, with each day seeing a significant increase over the previous day. Indonesia is now the new Asian epicentre, with 56,757 cases recorded on July 15; India reported 39,000 patients on the same day. COVID-19 fatalities are high, according to WHO. After decreasing for nine weeks, with the highest increases in Africa and Southeast Asia. COVID-19 fatalities worldwide surpassed four million on July 7. The last million deaths occurred in under 90 days, the lowest time interval for every one million deaths ever recorded.
High vaccination coverage has been shown in the United States and much of Europe to lower fatalities and even hospitalizations. For example, United Kingdom rises in incidence. There has been fewer hospitalizations and deaths over 87% of the adult population, as they are vaccinated with one dose and over 67% with two doses. In the United States, the increase in cases is concentrated in states with low vaccination coverage, with unvaccinated people accounting for most deaths. Over 55% of Americans have received one dosage, and 48% are completely immunized. It shifts the focus back to improving vaccination coverage and achieving global vaccine equality to avoid fatalities and the spread of dangerous strains. Some nations debate a booster dosage. Even though many African countries’ healthcare professionals have not been completely vaccinated, booster injections have begun to be given to patients with weakened immune systems in Israel.
In comparison, booster shots have been ruled out in the United States for the time being. With vaccine shortages reported in many Indian states. Even among the vaccinated, rigorous adherence to COVID-appropriate behaviour is the only option to postpone and mitigate the consequences of a third wave.
This spring, India and Latin America have seen a significant drop in new cases in the hardest-hit areas of the world. But the global numbers continue to grow. The Delta variety leads them to well-vaccinated regions such as Western Europe and the United States, low but rising infections. This spring, India and Latin America have seen a significant drop in new cases in the hardest-hit areas of the world. Vaccine doses have been given to over 4 billion individuals globally (52 for every 100 people), yet the discrepancy is striking. More than 80% of the population had at least one shot in some wealthy nations. In contrast, the proportion is as low as 1% in many of the poorest.
Why Taliban Could Not Control Panjshir Valley In Afghanistan Yet?
Taliban took over Afghanistan last week, and Panjshir valley in the north is the last hope for the people of Afghanistan to fight against the Taliban.
As it was 25 years ago, there is still a part of Afghanistan that tries to oppose the Taliban; it is the Panjshir valley. The villages that rebelled against the Soviets and Taliban’s, it is now that they’re fighting against the spread of the Islamic Emirate.
Valley Of the Five Lions, also known as Panjshir Valley, is in Northern Afghanistan, 150 kilometers north of Kabul, near the Hindu Kush Mountain Range. Due to its location in the Hindu Kush Mountain range, the Panjshir Valley is only accessible through the narrow Panjshir River; this makes it easy for forces defending. Panjshir is also famously known for emeralds. It has been the base of operations for the Taliban since the 1990s. Since it was never under their control, the area has become a key target for the US-led forces.
Around 150,000 people live in the valley, and the majority are Pashtuns. The valley’s ethnic majority is Tajik. The area’s history has made it the base of operations for the Taliban. Panjshir has never been captured by the Taliban during their earlier rule, nor by the soviets. The resistance, therefore, chose to base its operations in the area due to its history.
After the Soviets left Afghanistan in 1989, a civil war broke out in the country. Ahmad Shah Massoud, who was the most notable anti-Taliban fighter, led a group of militants to fight against the separatists. He was eventually killed by al-Qaeda terrorists in 2001, just two days before the 9/11 attacks.
Following the father’s footsteps, Ahmad Massoud, the son of legendary Ahmad Shah Massoud, declared the start of armed resistance against the Taliban forming in the Panjshir. The Northern Alliance flag has been raised in Panjshir province, confirming the legitimacy of this movement, officially back since 2001. The National Resistance Front (NRF), based out of the Panjshir Valley, led by Ahmad Massoud and the former Vice-President Amrullah Saleh, leading an anti-Taliban Movement.
The Panjshir Valley stands tall against the Taliban under the leadership of Ahmad Masood. Resistance movements have begun with the formation of the Northern Alliance. Bernard Henri Levy, the French philosopher, spoke to Ahmad Massoud on a phone call and quoted saying, “I am the son of Ahmad Shah Massoud, and surrender is not part of my vocabulary.” The Resistance has just begun; this is just the beginning.
The Washington Post published an op-ed on Wednesday in which Massoud reiterated his plea for help, asking the United States to supply his military with arms and ammunition. “The United States can still be a great arsenal of democracy” by supporting his fighters, he wrote.
Since President Ashraf Ghani left Afghanistan, Saleh has declared himself as the interim president. The Taliban has been massing its forces near Panjshir. The Salang highway has been closed. He further tweeted that the militants are avoiding any confrontations with the enemy forces.
India Takes Rein Of UNSC For August
As per procedure, India received the Presidency of the UN Security Council for August this year. The three major points that the Indian Presidency aims to focus on are maritime security, peacekeeping, and counter-terrorism policies.
What is the UN Security Council?
The security council is a body of the United Nations responsible for international security and peacekeeping. The body settles disputes and identifies unwanted threats and aggressions against member States.
There are 15 Members as a part of the council. They are obligated to abide by the decisions made by the Security Council. Out of these, there are five permanent and ten non-permanent members, India being a part of the newly elected non-permanent contingent.
India is currently serving as President of the UNSC for August and is expected to do so again in 2022. They succeed France who previously presided in July this year. The order of Presidency succession is decided alphabetically. Each member gets a fair chance to preside over the peacekeeping body.
Prime Minister Narendra Modi will be the first Indian PM to chair a meeting of the UNSC.
India in UNSC
India has joined the UNSC for the eighth time as a non-permanent member, serving a term of two years. The last time India was on the council as a member was in the year 2011-12, during the Middle East Crisis.
In the August meetings this year, the primary concern is said to be that of the coronavirus pandemic and its impact on the economy and mortality. India also aims to bid for a permanent seat on the UNSC and hence a high level of involvement is expected.
India plays an important role in the UNSC as it along with other members of the G-4 (Brazil, Japan, and Germany) are insisting on an expansion in permanent membership for countries. They want the permanent seats to be offered to countries other than the current five that hold the veto power, giving India a chance to display its potential at a global level.
India has previously chaired the counter-terrorism committee at the UNSC and introduced the concept of ‘zero tolerance’ for terrorism globally. They also successfully establish the Financial Action Taskforce (FATF).
This time around, India aims at improving maritime security and peacekeeping while returning to the counter-terrorism policies establish worldwide.
India’s efforts as President in August 2021
India is expected to organise three high-level meetings for the three topics that they have decided to focus on (maritime security, peacekeeping, and counterterrorism). A traditional breakfast of PRs was held by India’s Permanent Representative to the UN, T S Tirumurti. Along with the normal breakfast, Tirumurti put a display of Indian grains with items exquisitely prepared with those ingredients. A treat of Alphonso mangoes was also included in the breakfast. Tirumurti also presided over all meetings of the UNSC on day one.
Prime Minister Narendra Modi will chair a meeting of the UN Council virtually, while external affairs minister, Jaishankar will chair the meetings in person.
S Jaishankar expressed opinions on the opportunity to preside over the UNSC for August via his Tweet, saying that India looks forward to taking over the Presidency of the Global Organisation for the month.
As we take over UNSC Presidency for August, look forward to working productively with other members.
India will always be a voice of moderation, an advocate of dialogue and a proponent of international law. pic.twitter.com/kPRGnFOz87
— Dr. S. Jaishankar (@DrSJaishankar) August 1, 2021
Indian PR Tirumurti also thanked their predecessor France and announced the takeover via his Tweets while expressing his elation on the occasion.
— PR/Amb T S Tirumurti (@ambtstirumurti) August 1, 2021
India began their eighth term on January 1 this year. This non-permanent arrangement will span for two years, giving the possibility of another Presidency in late 2022. India has been grateful for its turn in chairing the UNSC and hopes to make decisions and resolutions that will be beneficial to the Indian Foreign Policy and countries around the Globe.
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