Adedapo Adesanya
By Adedapo Adesanya
The international crude oil benchmark, the Brent crude, fell by 6.76 percent or $1.45 to $19.99 per barrel on Monday.
The decline in oil prices was caused by demand worries and oversupply facing the market lately. This is coming after the crude fell last week to such levels for the first time in two decades.
After last Monday’s performance, which saw the United States’ oil prices falling below $0, the West Texs Intermediate (WTI) came under pressure yesterday, plunging 24.03 percent or $4.07 to sell at $12.87 per barrel.
This is happening because global oil storage is closer to reaching its full capacity and with the problem of demand on ground and some countries extending COVID-19 lockdown, things are anticipated to turn worse.
In 2020, the WTI and Brent have dropped 72 percent percent and 68 percent respectively, making it difficult for producers to breakeven. The world’s largest producer of oil, the US, faces a higher level of fire even as many companies have started filing for bankruptcy, while others are shedding market capitalisation at an alarming rate.
Traders are worried about the storage tanks at Cushing, Oklahoma, which is the US’s largest storage facility apart from the Strategic Petroleum Reserve (SPR). It is also where the contract is priced.
Last week, US stockpiles rose by 15 million barrels to 518.6 million barrels for the week ending April 17, according to the US Energy Information Administration (EIA).
According to reports, prices were also pressured after the United States Oil Fund (USO) known with retail investors, said it would sell all of its contracts for June delivery beginning Monday, in favour of longer-term contracts.
The Organisation of the Petroleum Exporting Countries (OPEC) and allies, including Russia, a group known as OPEC+, this month pledged to cut output by an unprecedented 9.7 million barrels per day in May and June, and will commence cut soon with some set to cut earlier than schedule.
Kuwait and Azerbaijan are coordinating oil output cut, while Russia is set to reduce its western seaborne exports by half in May.
