low for the glut of crude no longer needed by economies hard hit by
Coronavirus.
The price of crude oil fell to $11, crashing almost 40 percent in a
market flooded with crude and slammed by evaporating demand in the face
of the coronavirus pandemic. At 8:54 a.m. EDT on Monday, the
front-month WTI Crude price was plummeting by 37.22 percent at $11.47.
The Brent Crude front-month contract was also under pressure, trading
down 6.02 percent at $26.39.
Rystad Energy analyst Bjornar Tonhaugen said;
“The real problem of the global supply-demand imbalance has started to really manifest itself in prices.
“As production continues relatively unscathed, storage is filling up
by the day. The world is using less and less oil and producers now feel
how this translates in prices.”
Pierre Andurand, the head of the eponymous oil hedge fund tweeted;
“There is no limit to the downside to prices when inventories and pipelines are full. Negative prices are possible.”
In early trading in New York, West Texas Intermediate fell to as low
as of $10.96 a barrel, the weakest level since 1998. The plunge was
exaggerated as the May futures contract expires on Tuesday, leading to a
fire-sale among traders who don’t have access to storage.
The June contract for West Texas Intermediate futures, considered the
benchmark for U.S. crude prices dropped 11.5% to $22.14 a barrel. Brent
crude oil, the global benchmark, fell 6.1% to $26.38 a barrel.
The fall was more dramatic for the front-month May contract, which
fell 36.9% to $11.53 a barrel, near its lowest level since 1999. With
the May contract expiring Tuesday and no longer the most actively
traded, oil watchers don’t consider it the most accurate reflection of
price action.
The European benchmark contract, London Brent North Sea oil for June
delivery, was down 6.1 percent at $26.38 per barrel. Analysts said this
month’s agreement between OPEC and its peers to slash output by 10
million barrels a day was having little impact because of the virus
lockdowns and travel restrictions that are keeping billions of people at
home.
AxiCorp’s Stephen Innes told AFP;
“It’s a dump at all cost as no one… wants delivery of oil, with Cushing storage facilities filling by the minute.
“It hasn’t taken long for the market to recognise that the OPEC+ deal
will not, in its present form, be enough to balance oil markets.”
There are signs of weakness everywhere. Buyers in Texas are offering
as little as $2 a barrel for some oil streams, raising the possibility
that producers may soon have to pay to have crude taken off their hands.
The nearest timespread for the US benchmark has fallen to its weakest
level on record. Crude stockpiles at Cushing — the US’s key storage hub
— have jumped 48% to almost 55-million barrels since the end of
February. The hub had working storage capacity of 76-million as of
September 30, according to the Energy Information Administration.
See the key figures below;
West Texas Intermediate: DOWN 38 percent at $11.04 per barrel
Brent North Sea crude: DOWN 6.1 percent at $26.38 per barrel
London – FTSE 100: DOWN 0.8 percent at 5,740.37 points
Frankfurt – DAX 30: DOWN 1.4 percent at 10,479.39
Paris – CAC 40: DOWN 1.3 percent at 4,439.88
Milan – FTSE MIB: DOWN 1.4 percent at 16,824.83
Madrid – IBEX 35: DOWN 2.1 percent at 6,733.70
EURO STOXX 50: DOWN 1.4 percent at 2,848.16
Tokyo – Nikkei 225: DOWN 1.2 percent at 19,669.12 (close)
Hong Kong – Hang Seng: DOWN 0.2 percent at 24,330.02 (close)
Shanghai – Composite: UP 0.5 percent at 2,852.55 (close)
New York – Dow: UP 3.0 percent at 24,242.49 (Friday close)
Euro/dollar: UP at $1.0876 from $1.0875 at 2100 GMT Friday
Dollar/yen: UP at 107.72 yen from 107.54
Pound/dollar: DOWN at $1.2454 from $1.2499
Euro/pound: UP at 87.31 pence from 87.01 pence.
