By Adedapo Adesanya
With the market still shocked by huge fall suffered by the US oil benchmark, West Texas Intermediate (WTI), yesterday, the global benchmark, Brent Crude, seems to be heeding the call to head south quickly.
The WTI fell by over 306 percent on Monday and on Tuesday, the Brent is already shedding over 19 percent to trade at $20.66 per barrel, the lowest level since July 1999.
As at few minutes before 2pm, the WTI was up by 87.75 percent to -$4.70 per barrel.
Analysts said Brent turned sharply lower on Tuesday as the market realised that even sharp production cut agreed by members of the Organisation of the Petroleum Exporting Countries (OPEC) and their allies from next month would still result into an oversupplied market.
WTI futures contracts for May were priced at -$40 a barrel on Monday, meaning traders were actually being paid at least $40 to buy a barrel of oil.
This has brought about panic at the market, something that has not been witnessed in over 37 years because most storage facilities have run out of space because of a huge demand plunge.
Demand has collapsed because the disruption caused by the coronavirus crisis, which further led to restriction on movements across the globe, resulting into a massive supply glut.
In addition to the storage crisis and COVID-19, there are reports that a wave of oil from Saudi Arabia was heading to US shores.
And with little commercial space available, the additional crude could potentially force deeper production cut in the US shale patch in the coming months, an issue that has been the centre of a heated debate in Texas.
The Texas Railroad Commission is set to meet again later today to discuss the crisis.
Last week, the three commissioners failed to come to an agreement regarding mandated cuts across the state.
Analysts also believe that with yesterday’s development, the commissioners might have no choice but to agree on cuts.
Dipo Olowookere