WTI crude oil falls below US$14.50 as stockpiles rise

Daniel Fowler
May 24, 2020

The price of West Texas Intermediate oil lost all of its value Monday, plummeting to less than $1 per barrel in midday trading before May futures contracts dipped into negative numbers.

For the first time in history, USA oil prices ended in a negative as a supply glut forced traders to pay others to take the commodity.

Brent crude, the global benchmark, was changing hands at $25.61 a barrel for June delivery, up 0.15 per cent.

Oil prices have skidded as travel restrictions and lockdowns to contain the spread of the coronavirus curbed global fuel use, with demand down 30 percent worldwide.

The difference between the expiring May U.S. West Texas Intermediate crude contract and the coming June contract widened to a record at more than $60 a barrel and settled at $51.90.

"The storm for oil isn't over but at least for the time being it is less volatile than the headline-grabbing moves of the last few days", notes Carlo Alberto De Casa, chief analyst at ActivTrades, but added that in the long-term he sees the need for further production cuts from the Organization of Petroleum Exporting Countries (OPEC) and others.

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However, prices have continued to fall as analysts say the cuts are not enough - and U.S. crude's collapse yesterday was triggered by worries that key storage facilities in Cushing, Oklahoma, are under pressure.

The June WTI contract fell more than 18 percent to 20.43 per barrel. "There's no place to put it - we're running out of space to store oil". At the start of the year, a barrel of oil was $60 (€55) for comparison.

Traders scrambled to unload positions ahead of the contract's expiration, contributing to the historic drop, experts noted.

The world's major oil producers agreed to cut production by 9.7 million bpd in an attempt to get world supply under control as demand slumps, but those cuts do not begin until May.

Trifecta Consultants analyst Sukrit Vijayakar said U.S. refineries were not processing the crude supplies fast enough, resulting in fewer buyers and storage facilities filling up. Saudi Arabia is ramping up deliveries of oil, including big shipments to the United States.

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