International oil prices have fallen to their lowest level in more than two decades, as concerns over the economic impact of the coronavirus pandemic have hit global crude markets.
Brent crude oil fell 17.3% to $ 15.98 in Asian trading on Wednesday, its lowest level since mid-1999. International benchmark prices have dropped about 40% this week.
Brent’s fall follows a drop in the price of the American marker West Texas International, which at the beginning of the week fell into negative territory for the first time, as the spread of Covid-19 caused a drop in demand for crude oil and created a global glut of oil.
The historic collapse in WTI prices came when producers were forced to pay buyers to withdraw oil from them before the expiration of the futures contracts. Traders are concerned about the lack of space to store physical oil at the main transit point in Cushing, Oklahoma.
The price of Brent has been less volatile than WTI because much of it is shipped by sea to customers, which means it avoids landlocked bottlenecks.
On Wednesday in Asia, the price of WTI for delivery in June was 8% below $ 10.61 per barrel after plunging more than 40% the previous day.
“The realization of negative prices clearly scared the market, with concerns that we might see the same thing for the WTI contract in June and perhaps even in the Brent market,” said Warren Patterson, head of strategy raw materials at ING.
However, Patterson added that he believed it was unlikely that Brent would follow WTI in negative prices as his active futures contract expired. Unlike WTI, Brent was paid in cash and the oil was not physically delivered at the end of a contract.
He said the latest sale in the oil markets could put more pressure on Opec and other producers to cut production further in addition to the record supply cuts announced last week.
“They are already ready to make record cuts and will find it difficult to bear further cuts,” said Patterson.
WTI prices have fallen by more than two-thirds since the start of the year as the coronavirus epidemic has spread around the world, forcing much of the global economy to lock in and shutdown world travel and trade.
Analysts said the issue of negative prices could appear again when WTI’s June delivery contract expires. “The June contract is also expected to face liquidity concerns,” said Harry Tchilinguirian, senior oil economist at BNP Paribas. “Yet by then it is also likely that the availability of storage at Cushing will be further reduced compared to today. “
Inventories in the Asia-Pacific region also declined. Japan’s benchmark Topix fell 0.7% and the South Korean Kospi lost 0.4%. In Hong Kong, the Hang Seng lost 0.6% while the Chinese CSI 300 index of stocks listed in Shanghai and Shenzhen fell 0.1%.
Futures markets tilted the S&P 500 to gain 0.4% when trading begins later in the day. The Senate adopted a $ 484 billion aid program for small businesses and hospitals on Tuesday after an initial program was fully phased out.
Overnight, the Wall Street S&P 500 fell 3.1% as a result of the decline in the technology and financial sectors.