Crude Oil Futures See Historic Plunge
Crude oil prices saw an historic plunge on Monday, and with no one to buy the contract, West Texas Intermediate Crude for May futures tumbled below zero.
The front month contract settled at -$37.63 a barrel, as against Friday’s settlement price of $18.27 a barrel.
The previous low for a front-month contract was $9.75, way back in April 1986.
Meanwhile, WTI futures for June settled lower by $4.60, or about 18.4%, at $20.43 a barrel.
The tumble today was due to rising concerns about the excess supply in the oil market and the lack of storage facility, and mounting fears about the outlook for energy demand amid the coronavirus pandemic.
As WTI May series contracts expire tomorrow, traders were keen on rolling over positions to June month, to avoid taking delivery amid a lack of storage facilities.
Available oil storage capacity around the world is reportedly running thin – approaching full capacity amid declining global demand.
The troubled combination of falling demand amid travel restrictions around the world and lack of global storage for crude oil has pushed the oil prices to the lowest level more than 35 years. Stockpiles continued to rise sharply despite recent supply cuts.
Earlier this month, Russia and other oil-producing nations finalized an unprecedented production cut of nearly 10 million barrels, or a tenth of global supply, to boost prices amid the coronavirus pandemic.
The International Energy Agency has warned that the output cuts may not be enough to offset a severe plunge in oil demand. The IEA expects a 29 million barrel per day (bpd) dive in April oil demand to levels not seen in 25 years.
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