Oil prices yesterday collapsed to more than two-decade lows, with traders concerned that storage facilities are filling up as the COVID-19 pandemic strangles demand.
US crude benchmark West Texas Intermediate (WTI) briefly plunged almost 20 percent to below US$14.50 — its lowest since 1999 — as stockpiles continue to build.
Oil markets have plunged in recent weeks as lockdowns and travel restrictions to fight the coronavirus around the world batter demand.
Photo:EPA-EFE
The crisis was compounded after Saudi Arabia, kingpin of exporting group OPEC, launched a price war with non-OPEC member Russia.
Riyadh and Moscow drew a line under their dispute earlier this month, when they and other countries agreed to cut output by almost 10 million barrels a day to boost virus-hit markets.
However, prices have continued to fall as analysts say the cuts are not enough — and US crude’s collapse yesterday was triggered by worries that key storage facilities in Cushing, Oklahoma, are under pressure.
In a sign of the level of oversupply, the US Energy Information Administration said crude inventories in the world’s biggest economy rose by 19.25 million barrels last week.
Trifecta Consultants analyst Sukrit Vijayakar said US refineries were not processing the crude supplies fast enough, resulting in fewer buyers and storage facilities filling up.
There are also plenty of supplies from the Middle East with no buyers as “freight costs are high,” he said.
“I think we will see a test of the 1998 lows at US$11 sooner rather than later,” Oanda Corp senior market analyst Jeffrey Halley said.
Australia and New Zealand Banking Group (ANZ) said in a note that “crude oil prices remained under pressure, as projections of weaker demand weigh on sentiment.”
“Despite the OPEC+ alliance agreeing to an unprecedented cut in output, the physical market is awash with oil,” it said, referring to the OPEC and non-OPEC partners.
“Concern continues to mount that storage facilities in the US will run out of capacity,” ANZ said.
“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 added.
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