Crude oil price in US falls to level not seen since year 1999, WTI crude price below $15 a barrel
American oil prices fell to 1999 levels
US crude oil futures dropped more than 10% on Monday to 1999 levels amid fears that US vaults will soon overflow.
US storage volumes rise as refineries reduce activity due to falling demand.
Michael McCarthy, chief market strategist at CMC Markets in Sydney, believes that once vaults are full, producers will have to cut production..
The volume of oil in floating storage in tankers is also estimated at a record 160 million barrels..
May futures for WTI crude oil fell $ 3.40, or 18.6%, to $ 14.87 a barrel by 06:00 GMT. In trading on Monday, futures fell 21% to a low of $ 14.47 a barrel, the lowest level since March 1999..
Futures on Brent also fell 90 cents, or 3.2%, to $ 27.18 a barrel.
Investors bought June WTI contracts and sold their May futures before expiration, and this expanded the span contgango between the first two months to a record $ 8.70 a barrel..
In the contango market, prices are lower than in subsequent months, which encourages traders to store oil.
«WTI’s extreme contango also tells us that no one in the US wants oil in the short term.», – said Oanda senior analyst Jeffrey Halley.
Gloomy forecasts by the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency on the outlook for oil consumption reinforce bearish sentiment.
Oil industry slashes output amid an estimated 30% drop in global fuel demand due to the coronavirus pandemic.
Production cuts in OPEC and its allies, including Russia, will begin in May. OPEC + Group agreed to cut production by 9.7 million barrels per day.
«There are still concerns that the 10 million barrels a day cut will not be enough to offset the collapse in demand, so the outlook for oil prices remains weak.», – said McCarthy. Officials in Saudi Arabia predict that the overall reduction in global oil supplies could be nearly 20 million barrels per day, but that amount includes voluntary cuts from countries like the United States and Canada that cannot simply turn production on or off like most OPEC countries..
North American E&P companies cut their budgets by about 36% year on year, according to a Sunday note by James West, an analyst at Evercore ISI, while multinational companies cut their budgets by 23%..