- Oil prices have dropped again, this time by 16%, and has heightened fears of storage
- COVID-19 has led to a fall in global demand for oil and subsequently a fall in global prices of the commodity
- A number of producers have, meanwhile, initiated moves to cut down on production due to the drop in demand
Legit.ng has learned that oil prices have fallen by another 16% and led to fears over storage. Information available shows that West Texas Intermediate (WTI), which is the benchmark for the United States of America (USA), slipped 16.12%, or $2.06, to trade at $10.72 per barrel.
It has also been gathered that the international benchmark, Brent crude, traded 5.45% lower at $18.90 per barrel.
Estimates show that the coronavirus pandemic has erased as much as a third of global demand for oil, leading to prices tumbling to record lows.
Oil prices were subjected to a new form of pressure on Monday, April 27, 2020, after the United States Oil Fund, which trades under the ticker ‘USO’ and is popular with retail investors, said it would sell all of its contracts for June delivery beginning Monday, in favor of longer-term contracts.
According to the Economic Intelligence Unit (EIU), USO’s move is a recognition of the bleak prospects for the US oil sector in May and June 2020.
Several producers have also announced production cuts as demand for oil drops but some are convinced it won’t be fast enough to combat the unprecedented fall in demand resulting from the pandemic.
Meanwhile, Legit.ng had reported that U.S oil prices plunged, falling below $0 on Monday, April 20 to $-37.63 a barrel. It is the lowest level since oil futures trading began in 1983 as the economic crisis set off by the coronavirus pandemic continues to take a toll on the energy sector
Al Jazeera reports that oil prices were under pressure as the measures to curb the spread of the virus saw fuel demand evaporate.
That means oil producers are paying buyers to take the commodity off their hands over fears that storage capacity could run out in May 2020.
“There is little to prevent the physical market from the further acute downside path over the near term,” said Michael Tran, managing director of global energy strategy at RBC Capital Markets.
He added that: “Refiners are rejecting barrels at a historic pace and with U.S. storage levels sprinting to the brim, market forces will inflict further pain until either we hit rock bottom, or COVID clears, whichever comes first, but it looks like the former.”
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