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The President of America ignored his advisers with a view to maintaining the American economy open, which he knew was his main and probably only hope of being re-elected, he constantly downplayed the COVID-19 threat which he simply hoped would not be as bad as people were predicting but had no evidence to back up. The American President only bothered to liaise totally superficially with the Chinese and American experts to ensure that the COVID-19 was contained. He was unaware of the severity as the world have had many SARS virus epidemics in the past that were accepted as ‘normal’. He was unaware of the deaths caused even in his own family, this was typical of his superficial nature and all that was hoped by the Russians and Chinese.
As the death toll in America grew, the president of America immediately began damage limitation and blame assignment, as he insulted the Chinese and the World Health Organisation, eventually cutting off WHO funding from America, which potentially will kill millions of people. All of this to remain popular, like someone trying to climb up a glass wall in attempt to escape his fate.
Europe fared not much better, probably because at the time they were consumed with Brexit in a bitter struggle of jealousy and spite against the UK from Europe and because the Germany and France were trying to maintain financial dominance and dictatorship over Europe and Britain; even as the UK was leaving the European Union.
Leaders were trying to avoid tough unpopular decisions about the COVID-19 and Oil prices that were not perhaps in their own personal interest to take. Reactions seem to show that politicians (including world leaders) have a herd mentality, as do the stock market traders, financial institutions, medical institutions, Company directors and COOs, lawmakers and many other key sections of modern society, that cause the same in populations. There were various knee jerk reactions and general confusion reigned, in the case of the COVID-19 outbreak and Oil price crash.
Once Europe woke up after thousands of deaths in Italy and the rapid spread of the COVID-19 across the other European countries, it became obvious that no one even knew the origin or nature of how the COVID-19 was spread, how to protect against it and whether it was airborne or not? How long could it live outside the body? What sterilisation methods killed it. Was it seasonal or not? who was vulnerable to it? Was it a virus that targets the old or the young as many viruses seem to have a preference, or what is affective death rate per infection? There were many wild and differing reactions to the COVID-19 that all seemed to culminate in forms of restricted movement and reduction in contact between people. Of course this was inefficient and most people turned on the government looking desperately for someone to blame they blamed the government for shutting down too early not enough too long not having enough protective equipment even though it wasn’t sure what protective equipment was needed, generally turning on each other and also China, this was then the perfect time for the Oil plan to continue.
The Russians realising that global demand would, be extremely weak for Oil had worked closely with the Saudis to call off OPEC agreements that were in place and generally draw attention to the Oil price, as well as diplomatically working towards garnering support for a huge OPEC plus production cut deal. The Saudis responded in apparent outrage (as secretly planned) saying they would overproduce crashing the Oil price. It was by this time realised of course, that no matter what OPEC did, because of the lock downs, the dip in Oil price would come, how deep and how long and who it affected that mattered more than anything, hence they aimed to manage the effects. They also knew a huge cut would then create the environment for a rapid Oil price recovery as soon as the lockdowns and restrictions of movement were removed, and excess oil had been consumed.
The Saudis continued hiring all the VLCCs that they could get their hands on, these tankers would be filled with the over production that the Saudis promised, and the world doubted that they could maintain. The immediate plan was not understood by the Americans. For one they underestimated the ability of the Saudis and Russians to hold down, to exceptionally low values the WTI Oil price. The Americans had the example of the previous Oil price crash, where in fact the shale Oil producers (critical to high Oil output levels) were able to resist and re-emerge immediately after. The resurgence was because the Oil price had not been low enough for long enough and the simple nature of the land based horizontal drilling and fracturing work, meant that it lent itself to great efficiencies and cost reductions, being made especially under a administration very friendly to it. This time however the plan had been better thought out, the Saudis produced for months at extremely high levels, hired and sent virtually all of the world spare tanker supply (those available for hire plus their own) over to America and unloaded it, or stood it off the coast. These tactics ensuring that even when Saudi turned down the taps, back to the original pre-agreed levels ready for the future re-opening of economies, there was over a hundred million barrels of Oil off the American coast waiting to be unloaded, therefore continually suppressing the Oil price.
In fact, for the first time in history for a short time Oil in America was in a negative price, meaning that someone had to be paid to store it as almost all is available storage was full. The terrible lack of demand due to Corona COVID-19 coupled with the unsure timing of when any travel bans could be lifted, and world economies would take off again meant the higher levels of production which are now possible made Oil for a short time worthless.
The scale of the storage is unimaginably large. The 5-year average in America is around half full and this rolling average is used to estimate future price of Oil, if they are fuller production is higher than demand and the price will likely fall. Because of the huge amounts (of Oil) stored the oversupply does not correct immediately after a cut in production rates, as Oil is sold out of storage to fill any gap in the market until the level in storage drops, the price then should rise but people bet on the future against this trend sometimes. How quickly it occurs depends on what the amount (of Oil) that is stored above the required normal strategic levels and how much the demand is greater than the supply. Whilst the stocks are being depleted though it is common that some producers still raise output usually out of desperation for revenue and make demand equal supply then the price will remain low for longer.
This crisis was equally bad for Oil companies who also were unsure how to react to it. Everyone was aware that crude Oil inventories would also have to fall from full to the five-year average level before any Oil price recovery significant could occur, but bets were off about when the recovery would be. Would demand recovery occur within a month of the end of the corona virus or would travel resistance created by fear as well as suppressed economies cause a depression for years, or would in fact the demand for Oil never recover to previous levels? China very wisely opened first as it has had the longest time to get their act in order, China is one of the biggest Energy users and had reopened after a matter of months. Most thought that after a short-term low price, Oil would come roaring back to the 45 to 65 USD / bbl. level that had become the new normal since 2016. But others like Shell were predicting a 3-year downturn.
During February and Early march the Oil was practically free to take away, the government of China could take the Oil knowing that China would be opening up just before the Oil arrived and could therefore use some and store the rest when others could not. China ordered 117 of their own VLCC tankers to be filled with cheap Oil from the Middle East and South America to be delivered to its ports in April and May. (The oil was loaded onto the VLCCs in February and March, gaining a huge economic advantage of over 15 Billion USD compared to the pre-crash price.)
The president of America called in Big Oil, to talk about the crisis and what subsidies if any could help? He entered the discussion saying that he would fill the national reserve if needed and if that would help the Oil companies (but the reserve was already two thirds full.)
Exxon assured the president of America, in an extra emergency meeting in addition to their regular private meetings, that natural market forces will solve this problem and the President simply took their word