Oil yesterday slumped to a 17-year low as coronavirus lockdowns cascaded through the world’s largest economies, leaving the market overwhelmed by cratering demand and a ballooning surplus of crude.
Futures in London fell as much as 7.6 percent to the lowest since November 2002, while New York crude briefly dipped below US$20 a barrel.
Physical oil markets are struggling to store fuel, hit by a double whammy of virus restrictions eroding demand and a damaging war for market share between Saudi Arabia and Russia that has prices on track for the worst quarter on record.
Photo: AFP
“Demand concerns are critical but well known, what really took the market down were the signals we got from Saudi Arabia and Russia that they intend to continue their current path,” said Vivek Dhar, a commodities analyst at Commonwealth Bank of Australia in Sydney. “Market hopes of a deal have come undone.”
OPEC nations are not giving support to a request from the group’s president for emergency consultations over tanking prices, according to a delegate.
Algeria, which holds the cartel’s rotating presidency, has urged the secretariat to convene a pane, but the call has failed to gather the majority backing necessary to go ahead. Riyadh is among those opposing the idea.
The world normally uses 100 million barrels of oil per day, but forecasters predict as much as a quarter of that has disappeared in just a few weeks.
The plunge in consumption is without precedent since a steady flow of oil became essential to the global economy more than a century ago.
Brent crude for May declined US$1.45, or 5.8 percent, to US$23.48 a barrel on the ICE Futures Europe exchange as of 7:21am in London after falling to US$23.03 earlier.
The contract is also set for the worst month on record, down about 54 percent this month, and 64 percent lower this quarter.
West Texas Intermediate slid US$0.82, or 3.8 percent, to US$20.69 a barrel on the New York Mercantile Exchange after falling to US$19.92 in early trading.
The contract is down 54 percent this month and about 66 percent this quarter.
Global oil demand is in freefall and consumption might decline by as much as 20 million barrels a day, the International Energy Administration said.
That is forcing producers worldwide to slash output. Trafigura Group expects as much as 1 billion barrels to be sent into storage tanks in the coming months.
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