Oil prices plummet to 20-year low as demand for Covid-19 deepens – Business Live | Business


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The benchmark oil price index for the United States reached its lowest level since March 1999, as investors saw little growth in demand as coronavirus blockages continued in the world’s largest economies.

West Texas Intermediate (WTI) futures prices for May delivery fell to $ 14.47 per barrel at the start of the session, below levels seen even during the Iraq war. The drop in prices also partly reflects the functioning of the futures market, with the delivery contract expiring on Tuesday in May, which means that demand from some traders shifts to the following month.

Intermediate futures prices in western Texas reached their lowest point since 1997 at the start of the session.

Intermediate futures prices in western Texas hit their lowest point since early 1997. Photography: Refinitiv

However, the price action reflects the deep uncertainty surrounding the prospects for a rebound in demand. Futures prices for Brent crude oil, the global benchmark for North Sea oil prices, fell 2.2% to $ 27.47 per barrel, reaching their lowest point since significant production reductions have been envisaged.

The number of active oil rigs in the United States was 438, down 35% from last month, according to data from Baker Hughes released on Friday. This is the largest drop since February 2015, as oil producers are desperately trying to cut costs.

Even historic Opec + production cuts – the collusion of oil producers, including Saudi Arabia and Russia – failed to support prices. Rather, the tankers generally used for transportation were designed for storage by traders in the hope of higher prices.

Jeffrey Halley, senior market analyst at trading platform Oanda, said:

With the above ground storage bulging at the seams, the only hope of the WTI, it seems, is to reduce the production because of the imminent decisions of the authorities of the State of Texas and Oklahoma, and of many producers who close their doors.

In other developments this morning, China continued its gradual economic recovery efforts with lower interest rates. Extract from the Reuters report:

China lowered its key rate as planned on Monday to cut borrowing costs for businesses and support the economy hit by coronaviruses, after contracting for the first time in decades.

The one-year prime rate (LPR) was lowered by 20 basis points (bps) to 3.85% from 4.05% previously, while the five-year LPR was reduced by 10 bps to 4.65% against 4.75%.


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