Oil sell-off continues

The sell-off of oil has continued for a third day and has now spread to Brent crude, the international oil benchmark, that dropped to its lowest levels in two decades on Wednesday morning when Brent briefly hit US$16.

The plummeting oil prices that started with U.S. West Texas Intermediate (WTI) crude on Monday, which had fallen into negative territory, is spreading globally now.

The June contract price WTI on Wednesday dropped any gains it made Tuesday to trade at $11.29 a barrel.

Rystad Energy’s Head of Oil Markets Bjornar Tonhaugen commented: “The oil storage shortage problem is real and the delayed reaction to it is the reason markets are in panic during the last days, suppressing prices across WTI and Brent. This morning, the world’s waterborne light sweet crude benchmark, Brent futures,  succumbed to further spillover pressure from the WTI collapse and fell to new lows.”

He added: “The market seems to be realising what we have pointed out as a huge risk already since mid-March, that we may run out of storage capacity if not enough supply is taken off the market. Physical prices in the North Sea have traded in the teens for a while, but June Brent futures have held up - until now. Dated Brent, the physical benchmark for mid-May loadings was assessed at $13 yesterday while June futures are now below $17.”

Tonhaugen argued that: “Unless there is a massive shock, like millions of bpd in new shut-ins or new production curbs that will handicap the oil supply tornado, or decisions by countries around the world to open up sooner and increase demand, don’t be surprised if a barrel of oil gets cheaper than a latte in a while”