Oil Crashes to $11 as Demand Collapses

• Oil Crashes to $11 as Demand Collapses

Oil prices plunged to their lowest in two decades on Monday as investors doubt oil cuts would be enough to prop up prices given the size of drop in global demand.

The International Energy Agency (IEA) on Wednesday estimated that at least oil demand would decline by 29 million barrels per day (bpd) in April.

This, coupled with rising oil inventories in the US and concerns that earnings report due this week would highlight the negative impact of COVID-19 on global economy plunged global oil prices on Monday.

The US West Texas Intermediate (WTI) oil plunged by about 37.22 percent to $10.77 per barrel on Monday before retracing to $11.47, while the Brent oil, against which Nigerian oil is measured, declined by 6.02 percent to $26.39 a barrel as at 1:45 pm Nigerian time on Monday.

“Too much oil, with nowhere to put it,” said Kit Juckes, a senior strategist at Société Générale in London, noting that “oil-sensitive currencies are under pressure again”.

“The expiring contract is now mostly in the hands of physical oil traders and the behavior of the contract confirms what we already feared: That the U.S. is running out of storage at Cushing, Oklahoma, the delivery hub for WTI crude oil futures traded in New York,” said Ole Hansen, Head of Commodity Strategy at Saxo Bank.

“Speculators having bought the June contract now risks that it could get pulled lower over the coming weeks towards where the May is currently trading. Only a major change in the fundamental outlook through lower production, due to producers being forced out of business or leave wells idle, or improved demand for fuel can prevent,” Hansen noted.