In an industry affected by the spread of the Covid-19 pandemic, different forces are creating the prevailing uncertainty in the oil industry. The market quantitative measure of supply and demand is no longer sufficient for estimating the state of surplus or deficit of the market. Today more than any time before, the energy industry at large and the oil industry specifically combine numerous business models that are different in serving a world heavily impacted by the most severe economic downturn since the Great Depression of the 1930s. Within the oil industry, short cycle investment models are not providing markets with the scale or pace of supply growth that was being provided before the lockdown and price dip crises. On the other hand, long cycle investment models elsewhere are not finding the elephants that the investors are betting on. Ample supplies are available in commercial storages. In April, the <a href="https://www.iea.org/reports/oil-market-report-april-2020">International Energy Agency reported</a> a total of 3137 mb OECD commercial stocks. That's an estimated 208 mb above the 5 year average. Between the foreseen business challenges and the cushion of supplies, the industry sails through layers of floating, commercial and strategic stocks. The Opec+ agreement, led by Saudi Arabia and Russia, is the only framework of supply balance in place at the time. Rejuvenating investment appetite into the oil industry will certainly require a tight balance of supply and demand but in addition will also require a substantial reduction of commercial stocks. Compliance to the reduction of supplies is no longer an elected option, but a market necessity for the wide spectrum of producers. Demand will still require further recharging as economies surpass the fears of a second Covid-19 wave which is already evident in the US and China. As major financial and research groups begin to warn of a coming deficit cycle caused by low investment – that could cause a price shock – markets are slowly adapting to the current nature of the oil markets. The oil markets have been exhausted through the course of the trade war between the US and China throughout 2019 and further into 2020. The Macro indicators of the world economy as well as the trade activities are overwhelming the commodities markets in general, but the oil markets more specifically. As we observe price movements of different benchmarks, market dynamics are taking a different shape following the Covid-19 crisis. The state of uncertainty is overwhelming the trading powers during a time fear is one of the strongest motors of trade floor sentiments. Though stimulus packages injected liquidity into world markets, the current low daily volatility of oil prices does not indicate a major inflow of liquidity into the black gold. And while emerging markets are considered the major venue for oil supplies, current economic conditions are not supportive of growth in emerging economies that are heavily dependent on trade to support local currencies as well as maintain foreign exchange reserves. What's clear from this pandemic is that it has impacted the whole value chain of the oil and gas industry but without creating a supply shock. <em>Abdulaziz Al-Moqbel is a columnist in Saudi Arabia and writes for the Al-Riyadh daily </em>
