US oil prices have fallen to their lowest levels in over two decades as demand plummets around the world. This has put even more pressure on producers, who are running out of room to store their excess stock.
As markets opened in Europe on Monday, West Texas Intermediate (WTI) was down 17.9 per cent to $14.99 a barrel. However, it has fallen as low as $14.47 in Asia.
Elsewhere, it was a positive start to the day for European stocks, with BP and Royal Dutch Shell down 1 per cent and France’s Total down 2.2 per cent.
Jason Gammel, an analyst at Jefferies, said:
“The oil industry is facing the bleakest oil macro outlook since at least the late 1990s and perhaps ever.”
The prices of crude oil have plummeted due to the likelihood that the coronavirus pandemic will trigger a global recession, with the latest US developments only amplifying the worries surrounding falling demand.
OPEC Attempts To Stabilise Prices
In an attempt to stabilise prices, Opec has backed a deal to slash approximately 10 per cent of global oil supply, with reductions planned until Spring 2022.
Sebastien Galy, the senior macro strategist at Nordea Asset Management, said:
“With oil storage capacity on and offshore close to maximum capacity, one can be sure that the alarm bells are ringing, which means a next Opec+ round is [around] the corner.”
However, Monday’s fall was heightened by the fast-approaching expiration of the May WTI futures contract.
Contracts for June, in comparison, are down by 5.5 per cent to $23.66. The international oil benchmark, Brent crude, is down 2 per cent to $27.50 a barrel.
Storage Concerns Are Mounting In The US
With floating storage in tankers estimated to be at a record 160 million barrels, the US oil industry will continue to reduce output in the face of an estimated 30 per cent decline in fuel demand across the globe.
However, there are concerns that storage facilities in America will run out of capacity, with stockpiles at the main delivery point in Cushing, Oklahoma, increasing by nearly 50% since the start of March.