US oil plunges to low last seen in 1999
By Sean Farrell
Date: Monday 20 Apr 2020
(Sharecast News) - US crude oil futures plunged to a low not seen since the last century as concerns mounted that storage facilities could be overwhelmed due to plunging demand from the Covid-19 crisis.
The West Texas Intermediate (WTI) US oil benchmark dropped by as much as 21% to $14.47 a barrel on Monday - the lowest since 1999. At 07:59 GMT the index was down 19.2% to $14.76 a barrel, Bloomberg data showed.
The heavy fall suggested producers may need to reduce output still further. Opec and other large producers agreed on 12 April to cuts that would reduce global supply by about 10% but some analysts expect demand to fall by far more than that.
Demand for oil has been battered by the near-closure of economies around the world as nations try to contain the spread of Covid-19. Falling demand has left storage sites close to overflowing with signs that the situation could get worse.
Oil prices have plummeted in 2020 on fears that the Covid-19 pandemic will cause a crippling global recession. The International Monetary Fund has said the world faces its worst downturn since the Great Depression. Last week China reported a 6.8% fall in economic output for the first quarter.
David Madden, market analyst at CMC Markets, said: "The dreadful economic indicators released last week feed into the narrative that demand for oil will fall sharply."
Analysts said Monday's plunge was exacerbated by the imminent expiry of the WTI futures contract for May, leading to what the oil market calls a contango when short-term prices are lower than those in the future, encouraging traders to store oil.
"The extreme contango in WTI ... tells us that no one in America wants oil in the short-term," Jeff Halley, a senior market analyst at trading platform Oanda, said. "With above-ground storage bulging at the seams, WTI's only hope, it appears, is for production cut action from the impending decisions of state authorities in Texas and Oklahoma, and lots of producers going out of business."
The Baker Hughes oil rig count, released on Friday night, showed the US oil rig count down 35% to 438 from a month ago.
Email this article to a friend
or share it with one of these popular networks:
You are here: news
10 Lower Thames St,
London EC3R 6EN