Oil prices reach record low

The COVID-19 Pandemic has taken a toll on the oil markets as the Benchmark Brent and U.S. oil futures for June delivery have plunged to around two-decade lows on Tuesday. This news comes a day after U.S. May futures had sunk into the negative territory for the first time in history. The Brent for June delivery had fallen to as low as $18.10.

The $18.10 is the lowest value since November 2001.  At 1200 GMT, it was down 18% at $20.98. The June contract for U.S. West Texas Intermediate (WTI) crude faced a 21% decline to 16.14. It is the lowest value since 1999. WTI for May, in which trading turnover is much lower, hit negative $3.99, after Monday’s dive below $0 for the first time, settling at negative $37.63 a barrel.

The looming expiry of the front-month contract for May exaggerated the slump in the U.S. contract. The market is oversupplied with oil and the storage facilities becoming scarce. The holders of the contract for May delivery were in a tricky position of having to pay those taking the crude. Cushing, Oklahoma is the main U.S. storage hub. The delivery point for WTI is expected to be full within weeks.

Sweeping cuts have been announced by OPEC and its allies including Russia. The world demand has dropped to as much as 30% due to the economic standstill of the COVID-19 Pandemic. JBC Energy said in a note, “The recently agreed supply cuts do little to solve the near-term oversupply problem in the global market.”

Leading global oil producers might negotiate again to discuss the output deal if needed, according to Kremlin spokesman Dmitry Peskov. U.S. President Donald Trump has called the current situation a short-term issue caused by a “financial squeeze.” He said that they would consider halting Saudi Arabia’s oil imports. Saudi Arabia is the world’s biggest exporter who spearheaded OPEC efforts to curb output.