USA crude falls below $15 a barrel as virus throttles demand

USA crude falls below $15 a barrel as virus throttles demand

Oil prices plunged below zero on Monday for the first time in history, with the U.S. benchmark West Texas Intermediate (WTI) closing at -$37.63 a barrel.

Covid-19 has caused global demand to shrivel up, leaving U.S. producers with excess supplies but with dwindling space to store physical crude.

In New York, West Texas Intermediate (WTI) dropped by a staggering 43%, the most since the contract began trading in 1983, to $10.34 a barrel, the weakest level since 1986.

Worldwide benchmark Brent crude on Monday dropped 4.2 per cent to $26.91 a barrel.

The June WTI contract, which expires on May 19, fell about 18% to trade at $20.43 per barrel.

The contract for oil delivery in May is close to expiring, so trading is much more active in the June contract.

The price for May contracts on Monday burned all value, revealing the oversupply in the USA oil market. "This is why the Brent crude average oil price for 2021 is holding up so well at $40 a barrel", Schieldrop explained.

"The recovery will be much slower than the market is now pricing in simply because social distancing measures can be relaxed but not removed until we have a vaccine or a very effective cure", said Andrea Cicione, head of strategy at TS Lombard in London. But the oil price slump has cancelled out the rand losses, and - at this stage - will ensure a deep cut in petrol and diesel prices. A US crude oil benchmark has hit 34-year lows.

"It's a dump at all cost as no one... wants delivery of oil, with Cushing storage facilities filling by the minute", AxiCorp's Stephen Innes said.

The way the global oil market works and prices oil into the future, this foray into negative territory is very unlikely to have an impact on domestic gas prices, De Haan tells me by email. The U.S. oil hub in Cushing, Okla., had 55 million barrels of oil in storage as of Friday, the highest level since 2018.

"April is expected to be the bleakest month for the industry, with demand set to plummet by 29 million barrels a day compared with the same month past year", International Energy Agency said in a statement.

The drop, also due to a lack of storage capacity, means that producers may be forced to pay buyers to get rid of the oil.

In Japan, exports declined the most in almost four years in March as USA -bound shipments, including cars, fell at their fastest since 2011. "It's hard to be bullish on global economic growth with oil prices at multi-decade lows". The two sides agreed more than a week ago to cut supply by 9.7 million bpd, but that will not quickly reduce the global glut.

The prices that went negative were WTI - the US -based benchmark.

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