Benchmark Brent and US oil futures for June delivery have plunged to around two-decade lows.
- OPEC has announced sweeping cuts in production, almost 10 per cent of global supplies
- But coronavirus lockdowns have seen demand drop as much as 30 per cent
- Donald Trump has called on the US Government to make funds available to his nation’s oil and gas industry
It came a day after US West Texas Intermediate (WTI) crude oil May futures sank below $0 for the first time in history due to demand tumbling amid the coronavirus crisis.
Brent oil is considered the key benchmark price for crude oil globally, while WTI is the main US price.
Brent comes from oil fields in the North Sea, between the United Kingdom and Norway, while West Texas Intermediate is sourced from US oil fields.
Brent for June delivery, known as the front-month contract after the May futures contract expired, fell to as low as $US18.10, its lowest since November 2001.
At midnight AEST, it was down 20 per cent at $US20.47.
The West Texas Intermediate crude oil for May delivery rose to $US1.30, after plunging below $0 for the first time ever on Monday (local time).
The US crude futures had slumped in dramatic fashion, with the front-month May contract, which expires Tuesday (local time), settling at negative $US37.63 a barrel.
“It’s the worst oil price in history,” said Ryan Sitton, commissioner at the Texas Railroad Commission, which regulates the state’s oil industry.
“Which shouldn’t surprise us, because it’s the inevitable result of the biggest supply and demand disparity in history.”
With the market oversupplied and storage facilities already brimming, holders of the May contract were in the unprecedented position of having to pay those taking the crude.
Traders essentially offered to pay someone else to deal with the oil they were due to have delivered next month.
The main US storage hub in Cushing, Oklahoma, is expected to be full within weeks.
The June contract for US West Texas Intermediate crude dropped 23.7 per cent to $US15.59, after hitting its lowest since 1999.
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US President Donald Trump on Tuesday called on the Government to make funds available to the US oil and gas industry, calling Monday’s crash a “financial squeeze” and mooting a halt to Saudi imports.
The Organisation of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, have announced sweeping cuts in production, amounting to almost 10 per cent of global supplies.
But with economies virtually at a standstill due to coronavirus lockdowns, demand has dropped as much as 30 per cent.
Efforts to limit the spread of coronavirus have put major cities around the world in lockdown. Air travel has been seriously curtailed and millions of people are working from home, leading to far fewer commuters on the roads.
“With no more generous production cuts announced and as the last remaining storage facilities get filled to the top with oil, we can expect to see such huge swings in oil prices from now on,” Louise Dickson of consultancy Rystad Energy, said.
“The mild daily changes in the oil price that we were used to some months ago may now become luxuries of another era.”
Kremlin spokesman Dmitry Peskov said leading global oil producers could hold talks again to discuss their output deal further if needed.
Top oil exporter and de facto OPEC leader Saudi Arabia said it was ready to take extra measures to stabilise oil markets along with other producers.
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