USA oil market reaches negative prices

USA oil market reaches negative prices

But with falling gasoline demand due to pandemic-related shutdowns and the price war resulting in unattractive, 18-year low crude prices of $21 per barrel, that oil is just sitting in storage tanks that are getting more full each day.

Ahead of that deadline oil futures finished lower on Friday, as a fears of a surge in surplus oil and a huge drop in global demand sent prices down for a fifth straight week in a row.

Containment measures have caused demand to slump and supply chains to be severely disrupted, dramatically lowering demand for oil.

According to WSJ, Saudi Arabia may need to cut prices even further as global benchmark Brent has fallen below even the discounted rates at which the country is looking to sell.

That all changed this month when Saudi Arabia launched a price war with Moscow, after OPEC and non-member Russian Federation failed to clinch an output-cutting deal to curb the market impact of the deadly COVID-19 outbreak.

In Europe, May Brent crude, the global marker, fell $US1.41, or almost 5.4%, to $US24.93 a barrel, for a weekly loss of 7.6%.

The Houston Chronicle also cited Ed Longanecker, president of the Texas Independent Producers & Royalty Owners Association (TIPRO), as saying that in the letters to oil companies, shippers state that they plan to terminate or change crude purchase contracts against the backdrop of plummeting demand and refinery slowdowns.

"It seems market dislocations will happen as producers will start running out of room store crude".

"According to industry reports oil storage levels globally have already reached 75 per cent of capacity, and continued stockpiling under closed demand would crash the prices to $10 in the coming months unless industrial activity restarts".

"If the Saudis and Russians follow through with the unleashing of record oil supply next month, energy markets will have to brace for another plunge in oil prices".

He also said oil output in the United States, the world's largest producer, could fall by 1.5 million barrels per day this year with the oil price at $30-$35 per barrel. At the last summit of the Organisation of Petroleum Exporting Countries (OPEC) held in Vienna, President Vladmir Putin refused Saudi Arabia's plan to cut oil production, preferring instead to maintain current levels, see the price fall and hurt U.S. shale oil producers whose product is more costly to extract than Russia's crude oil.

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