(Bloomberg) – London oil fell to the lowest level in nearly 21 years as the global benchmark succumbed to the crisis that dragged US futures below zero for the first time in history this week.
Brent futures for June lost 12% and were trading close to $ 17 a barrel, while New York’s West Texas Intermediate fell 4% after losing nearly half its value on Tuesday. Prices continue to fall amid fears that the huge surplus sent by the May WTI to less than $ 40.32 a barrel on Monday will continue to rise.
With global demand stifled by isolation measures to fight the coronavirus, concern that unwanted oil will overwhelm storage capacity has sparked a sales rush. OPEC + coalition oil ministers held an unanticipated conference call on Tuesday to discuss the collapse in crude prices, although they said in a statement that no further policy steps were decided.
The alliance agreed to cut production by about 10 million barrels a day earlier this month, but cuts will not begin until May. Even then, they will not be enough to balance the fall in demand for the virus, which could reach 30 million barrels a day.
There are signs that these extremely low prices are not going to go away, as tanks around the world fill up. Royal Vopak NV, the world’s largest independent storage company, said almost all of the space has been sold, while Clarksons Platou noted that floating storage is accelerating at an “unprecedented rate.”
The crisis could make the United States Oil Fund, the world’s largest oil-tracking vehicle, another victim. The fund has been quick to switch its holdings to longer-term contracts, among the measures imposed in recent days.
More victims have begun to emerge. Interactive Brokers LLC announced a provisional loss of $ 88 million after clients who had long positions in the WTI for May to maturity recorded losses that exceeded principal in their accounts. In South Korea, the collapse froze brokerage firm Kiwoom Securities Co.’s trading system as it did not recognize sub-zero prices.
“The entire energy market is on the brink of a precipice with the Brent crash today, showing that what should have been contained in the expired WTI contract had a far-reaching indirect impact,” said Howie Lee, economist at Oversea. -Chinese Banking Corp. in Singapore. The United States Oil Fund is in trouble, and there is still no answer on storage or when demand could improve, he added.
Brent for June delivery fell 12% to $ 17.10 a barrel on the ICE Futures Europe exchange at 7:27 am in London, after plummeting 24% on Tuesday.
The WTI for June lost 4.4% to US $ 11.06 per barrel on the New York Mercantile Exchange. The contract fell to $ 6.50 at one point on Tuesday, and trading was suspended three times to manage volatility.
Original Note: Brent Oil Drops to 21-Year Low as Selling Pressure Intensifies
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