Brent crude oil rose today after slumping below $16 a barrel to its lowest since 1999, supported by voluntary as well as the prospect of forced production cuts to tackle a glut caused by the coronavirus crisis.
But that has had little effect, with prices continuing to plummet, as analysts predict it will not make up for the massive hit to demand. Saudi Arabia on Tuesday said that it was ready to take extra measures with other producers, though the next formal OPEC+ meeting is not until June.
The alliance agreed to slash production by about 10 million barrels a day earlier this month, but the cuts won't kick in until May. "Demand is low, supply is high and storage is full". Royal Vopak NV, the world's biggest independent storage company, said nearly all of its space is sold, while Clarksons Platou said floating storage is filling at an "unprecedented pace". The value of its assets fell by more than $1 billion on Tuesday. That jaw-dropping slide is because the world has more crude than it can use.
He says fracking has flooded the United States market with new oil, followed by OPEC and OPEC Plus nations putting more oil out there driving prices down yet again.
Meanwhile, Interactive Brokers LLC announced an $88 million provisional loss after customers holding long positions in May WTI at expiration triggered losses in excess of the equity in their accounts.
That's the first time in history, that the price has turned negative.
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The U.S. government's official supply report is due later on Wednesday.
Worldwide benchmark Brent crude, which fell 24% in the previous session, touched $15.98 a barrel at one stage today, hitting its lowest since June 1999.
In the latest sign of excess supply, the American Petroleum Institute yesterday said that USA crude inventories rose by 13.2 million barrels.
This difference in price between the two futures is given by the contango in the oil market: futures with later expiries have usually higher prices because they discount the price for storage.
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