Michael Tran, Managing Director of Global Energy Strategy at RBC Capital Markets, said earlier, “There is little to stop the physical market from continuing to deteriorate in the short term.
“Refiners are rejecting barrels at an historic rate and with US storage levels going to the brim, market forces will inflict more pain until we bottom out, or COVID clears , whichever comes first, but it looks like the first. “
The price of May contracts virtually wiped out all value, breaking all oil price records since 1946.
The spectacular downward trajectory illustrates how oversupply in the US oil market has taken place while industrial and economic activity is currently stalled.
One exit agreement per t a Organization of the Petroleum Exporting Countries (OPEC) and Allied members last week to limit supply were agreed, but there seems to have been little to prevent a collapse in one-third of global demand.
Oil prices fell to less than a cent a barrel
Governments in dozens of countries around the world are desperately expanding blockages to slow the spread of the coronavirus.
The world continues to struggle to control the killer epidemic and with producers continuing to pump, a huge fire sale has broken out among traders who do not have access to storage.
In Texas, buyers were offering as little as $ 2 per barrel for certain oil flows while in New York, West Texas Intermediate fell to $ 5.48 per barrel at 1:06 p.m. local time. Brent crude fell 5.8% to $ 26.44.
The huge drop in oil prices caused US stocks to drop after a strong two-week recovery as investors became increasingly wary of what should be a disappointing week for results and economic data.
Energy stocks lost 1.9% of their value and were on track for their sixth slide in seven sessions, as the May West Texas West (WTI) contract fell by more than half to reach its lowest price never recorded low.
Analysts have warned that the huge drop in oil prices highlights the decline in global growth as demand dries up.
Dan Russo, chief market strategist at Chaikin Analytics, said: “This could be a concern for investors who expected a V-shaped recovery on the economic front.
“Oil prices tend to be an indicator of the health of the global economy.
“It is difficult to be optimistic about global economic growth with oil prices at low levels for several decades. “
David Winans, Director, US Investment Grade Credit Research, PGIM Fixed Income, said: “Today’s price movement gives the impression that oil is hurting the kidneys. A very painful move but that cannot last long, because the producers we are talking about. “
“The” supply shock “of the OPEC + collapse in March was truly a mirage, the demand shock of COVID-19 crushes everything.
“Ultimately, the path of oil prices will follow the path of this virus.
“Until demand shows signs of life, oil prices will likely remain on vital assistance. “
Oil prices jumped nearly 5% today on Monday, after oil-producing countries struck a historic deal that will see production cut by almost 10 million barrels a day.
OPEC and its allies have agreed to a record reduction in oil production after several days of talks.
The production reduction begins on May 1 and will continue until the end of June.
The deal was made as a measure to curb falling oil prices with the demand-hit coronavirus pandemic.
This is a story of rupture. More soon…