International oil prices have tumbled to their lowest level in more than two decades as concerns over the economic impact of the coronavirus pandemic hit global crude markets.
In Asian trading on Wednesday, Brent crude dropped as much as 17.3 per cent to $15.98 — its lowest point since mid-1999. Prices for the international oil benchmark are down by about 40 per cent this week.
The fall in Brent follows a plunge in the price of the US marker West Texas International, which earlier this week fell into negative territory for the first time as the spread of Covid-19 has pummelled demand for crude and created a global oil glut.
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.
Brent’s price has been less volatile than WTI as much of it is shipped by sea to customers, meaning it avoids landlocked choke points.
In trading in Asia on Wednesday, the price of WTI for June delivery was 8 per cent lower at $10.61 a barrel after plunging by more than 40 per cent a day earlier.
“The realisation of negative prices has clearly spooked the market, with worries that we could see the same for the WTI June contract and possibly even in the Brent market,” said Warren Patterson, head of commodities strategy at ING.
However, Mr Patterson added that he believed it was unlikely that Brent would follow WTI into negative pricing as the expiry of its active futures contract approached. Unlike WTI, Brent trading was settled in cash and the oil was not physically delivered at the end of a contract.
He said the latest sell-off in oil markets could heap more pressure on Opec and other producers to cut output further on top of record supply reductions announced last week.
“They are already set to implement record cuts and it will be a struggle for them to stomach further reductions,” Mr Patterson said.
WTI prices have fallen by more than two-thirds since the start of the year as the coronavirus outbreak has swept across the globe, forcing much of the world economy into lockdown and bringing global travel and trade to a halt.
Analysts said the issue of negative pricing could again emerge the nearer WTI’s contract for June delivery gets to expiry. “The June contract is also likely to face liquidity challenges,” said Harry Tchilinguirian, senior oil economist at BNP Paribas. “Yet, by then it is also likely that storage availability at Cushing will be further reduced relative to today.”
Stocks across Asia-Pacific were also lower. Japan’s benchmark Topix fell 0.7 per cent and South Korea’s Kospi shed 0.4 per cent. In Hong Kong, the Hang Seng lost 0.6 per cent while China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks slipped 0.1 per cent.
Futures markets tipped the S&P 500 to gain 0.4 per cent when trading begins later in the day. The Senate on Tuesday passed a $484bn aid package for small businesses and hospitals after an initial programme was fully drawn down.
Overnight, Wall Street’s S&P 500 dropped 3.1 per cent led by declines in the technology and financial sectors.
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April 22, 2020 at 12:05PM
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International oil prices fall to more than two-decade low - Financial Times
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