US oil price crashes to record low as coronavirus hits demand

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    US oil prices crashed below $5 a barrel on Monday, hitting the lowest level since the contract launched in 1983, as the collapse in demand triggered by the coronavirus pandemic leaves the world awash with crude that it is struggling to store.

West Texas Intermediate, the US marker, lost 74 per cent on Monday, sinking to a low of $4.04 a barrel, on warnings that storage could fill up within weeks — including at the benchmark’s delivery hub of Cushing, Oklahoma.

Lockdowns imposed in many of the world’s major economies have sent crude demand tumbling by as much as a third, leaving the industry facing what Jefferies analyst Jason Gammel called perhaps “the bleakest oil macro outlook” he had ever seen.

Physical grades in many North American regions have fallen into the low single digits — with some contracts changing hands for as little as $2 a barrel — reflecting a dearth of buyers able to take delivery, even as prices for later contracts have held up marginally better due to some investors betting on an eventual rebound.

In Canada, spot prices for Alberta’s heavy oil, which sells at a deep discount to WTI, traded at below minus $6 a barrel in the spot market, according to traders and brokers.

The possibility of negative prices for the main US grades is growing, with the prospect that producers could pay traders to take oil off their hands to try and forestall the shutdown of fields ahead of their rivals.

News and Phonto Credit: FT.com

Stephen Schork, editor of oil-market newsletter The Schork Report, said he expected access to storage capacity in the US to be exhausted within the next two weeks — and cautioned that the collapse of the country’s oil consumption was accelerating.

“It just gets uglier from here,” Mr Schork said, adding that sharply rising unemployment numbers meant fewer and fewer Americans would be driving, hurting petrol demand even during its peak summer months.

“This summer is dead on arrival. The biggest demand months are not going to happen,” he said.

Part of the rapid decline in WTI prices reflects technicalities around the contract for oil to be delivered in May, which expires on Tuesday while short-term storage issues are severe. Still, WTI for June delivery was also down 10 per cent at $22.62, while Brent crude, the international marker, dropped 5 per cent to $26.72.


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