By Adedapo Adesanya
The Brent Crude fell below $20 a barrel for the first time in 18 years on Tuesday, April 21 barely 24 hours afterthe United States crude oil prices sold below zero on Monday.
As at 9pm (Nigerian time), the Brent traded at $19.80 per barrel after shedding $5.77 or 22.6 percent. On its part, the West Texas Intermediate (WTI) made a recovery, but selling at $13.05 per barrel.
In the face of demand worries, oil prices have caved in, but this was Brent’s worse level yet since 2002 caused by a technological bust and the 9/11 attacks in the US.
This time around, the market is faced with three major problems – low demand, high supply, and storage problems which analysts have said will further weakened price because there is still a lot of oil being produced that is going into storage and not being used.
After Monday’s trade, when the front-month May US contract fell into negative territory for the first time in history, Tuesday set a new milestone as more than 2 million contracts for US crude for delivery in June changed hands, the busiest day in history, according to market experts.
Oil inventories have been building for weeks after Saudi Arabia and Russia in March failed to come to terms cut production as the coronavirus pandemic worsened and this led to an oil price war which saw the market filled with cheap crude.
In April, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, finally announced sweeping cuts in production of up to almost 10 percent of global supplies.
However, with economies at a standstill due to coronavirus lockdowns, that is not enough to offset the declining demand.
Both Saudi Arabia and Russia said on Tuesday that they were ready to take extra measures to stabilize oil markets along with other producers, but they have not taken action yet.
The International Energy Agency (IEA) on Tuesday also called for the OPEC-led group to take more production offline and faster than previously agreed.
Modupe Gbadeyanka