The slide in oil prices continued apace on Wednesday, with Brent crude dropping to levels not seen in more than two decades as concerns over the economic impact of the coronavirus pandemic hit global markets. The international oil marker fell as much as 17 percent in Asian trade to $15.98 a barrel – its lowest point since mid-1999 – before recovering slightly to sit around $17 as markets opened in Europe. Prices are down by about 40 percent this week.
The decline in Brent follows a plunge in the price of the US marker West Texas Intermediate, which earlier this week fell into negative territory for the first time as the spread of Covid-19 pummelled demand for crude and created a global oil glut. Lockdowns and travel restrictions across the world’s major economies aimed at containing the spread of Covid-19 have caused demand for crude to evaporate as travel by road and air dries up.
The historic collapse in WTI prices came as producers were forced to pay buyers to take oil off their hands ahead of the expiry of futures contracts. Traders are concerned about the lack of space to store physical oil in the key transit point of Cushing, Oklahoma.
Oil goes on wild ride over storage fears Price of active WTI futures contract per barrel in $20Brent’s price has been less volatile than WTI because much of it is shipped by sea to customers, meaning it avoids landlocked choke points. But concerns are growing that other storage options, such as floating vessels, could hit capacity as well.
“The idea that floating storage around the world is filling up just as fast [as US storage] is a story that weighs on another crude [benchmarks] including Brent ,” said Robert Rennie, global head of market strategy at Westpac.