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Brent oil futures plunge as growing glut feeds market panic

CommoditiesApr 21, 2020 05:25PM ET
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© Reuters. The sun is seen behind a crude oil pump jack in the Permian Basin in Loving County

By Scott DiSavino

NEW YORK (Reuters) - Brent oil futures prices plunged again on Tuesday, extending oil market panic into a second day with no end in sight to a swelling global crude glut as the coronavirus pandemic has obliterated demand for fuel.

Monday and Tuesday have been two of the most turbulent days in the history of oil trading, as investors confronted the reality that worldwide supply will overwhelm demand for months or years and current production cuts to offset that glut are nowhere near sufficient.

After Monday's trade, when the front-month May U.S. contract fell into negative territory for the first time in history, Tuesday set a new milestone as more than 2 million contracts for U.S. crude for delivery in June changed hands, the busiest day in history, according to exchange operator CME Group (NASDAQ:CME).

Brent futures (LCOc1) for June delivery settled down 24% to $19.33 a barrel, their lowest since February 2002. U.S. West Texas Intermediate (WTI) crude for June, the front-month contract as of Wednesday, fell $8.86, or 43%, to settle at $11.57.

The U.S. May contract (CLc1), which expired on Tuesday, rebounded from its deep dive into negative territory, rising to $10.01 from the previous day's settlement at minus $37.63.

Oil inventories have been building for weeks after Saudi Arabia and Russia early in March failed to come to terms on extending output cuts as the coronavirus pandemic worsened. Since that time, the pandemic's spread has cut fuel demand by roughly 30% worldwide.

The Organization of the Petroleum Exporting Countries and its allies, including Russia, finally announced sweeping cuts in production in early April, amounting to almost 10% of global supplies. But with economies virtually at a standstill due to coronavirus lockdowns, that is not enough to offset the declining demand.

Both Saudi Arabia and Russia said on Tuesday they were ready to take extra measures to stabilize oil markets along with other producers, but they have not taken action yet.

"The math is pretty simple. Current oil production is about 90 million barrels per day, but demand is only 75 million barrels per day," said Gregory Leo, chief investment officer and head of global wealth management at IDB Bank.

Meanwhile, in Texas, however, oil and gas regulators declined to force producers to curtail oil output. The Texas Railroad Commission, which regulates energy companies in that state, had considered intervening in markets for the first time in nearly 50 years.

"Texas punted their decision and with OPEC not showing any urgency, that pretty much means the world will run out of room to store oil by the second week of May," said Edward Moya, senior market analyst at OANDA in New York.

The main U.S. storage hub in Cushing, Oklahoma, delivery point for WTI, is expected to be full within weeks.

Official U.S. government data shows that storage at Cushing was just 70% full as of mid-April. Traders, however, said that whatever was left then has been spoken for by firms sending oil to the hub right now.

U.S. President Donald Trump called on the government to make funds available to the U.S. oil and gas industry, calling Monday's crash a "financial squeeze" and mooting a halt to Saudi imports.

U.S. crude inventories rose by 13.2 million barrels in the week to April 17 to 500 million barrels, data from industry group the American Petroleum Institute showed on Tuesday. Analysts had expected a build of 13.1 million barrels. [EIA/S]

Official government data is due to be released on Wednesday.

Brent oil futures plunge as growing glut feeds market panic
 

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Comments (13)
David Hermansen
DaveH Apr 21, 2020 9:23PM ET
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One calendar quarter profit spike for refiners
William Smith
William Smith Apr 21, 2020 8:31PM ET
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As long as 3 weeks ago EVERYONE paying attention knew this was coming, and several wrote about it eloquently. Now it's like, gee, who knew this was going to happen? Duh!
TeaMaker Tex
TeaMaker Tex Apr 21, 2020 6:23PM ET
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It might also have to do with European oil companies which are not on real solid ground with the oil glut.
Ramesh Shah
Ramesh Shah Apr 21, 2020 1:17PM ET
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June July Aug contracts heading to $5 ....unless all Producer cut 30% immediately
Sevantilal Patel
Sevantilal Patel Apr 21, 2020 11:48AM ET
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How the global storage capacity will increase in just one or two months. June Futures Are Destined in single digit. U. S. Shale production has to curtailed substantially.
mark johnson
mark johnson Apr 21, 2020 10:06AM ET
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Use all the empty aircraft in airiIzona desert. Fill all the fuel tanks in a few thousand of these aircraft. Come back later and pull the fuel out. Could store wuite a bit this way with the several airplane graveyards in the inites states.
Tutor Joseph
Tutor Joseph Apr 21, 2020 7:50AM ET
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Trump and his policies? Look at Oil Futures and Dow . Plunging to abysmal.
mark johnson
mark johnson Apr 21, 2020 7:50AM ET
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Trump didnt create the covid virus.
Sibtain Saleem
Sibtain Saleem Apr 21, 2020 7:17AM ET
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When oil atart rise again?
Henry Bwalya
Henry Bwalya Apr 21, 2020 4:54AM ET
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Hmm how long will this downfall in crude oil last?
Phong Nguyen
Phong Nguyen Apr 21, 2020 4:54AM ET
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Wont last long ! OPEC and all oil rich countries will have urgent announcement they all will hane productions cut to boost price any moment now.
shahid Awan
shahid Awan Apr 21, 2020 4:46AM ET
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This is unbelieable infact look a very bad dream for crude
Brad Dover
Brad Dover Apr 21, 2020 1:02AM ET
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The collapse in prices has threatened to tilt the once-booming U.S. oil industry into bankruptcy.
Space Lord
Space Lord Apr 21, 2020 1:02AM ET
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Wow wow wow. Take it easy. Oil industry is fine and oil in positive lifestyle
MO Asou
MO Asou Apr 21, 2020 1:02AM ET
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Space Lord   i bought yesterdat @ 0,20  . Any idea what will happen next?
Samuel Hong
Samuel Hong Apr 21, 2020 1:02AM ET
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$37 a barrel is no collapse.
Idar Polden
Idar Polden Apr 21, 2020 1:02AM ET
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try to give it away!
Al Vlaj
alvlaj Apr 21, 2020 1:02AM ET
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Samuel Hong nope, but negative $37 a barrel is.
jay show
jay show Apr 20, 2020 11:49PM ET
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thanks
Fred Smith
Fred Smith Apr 20, 2020 10:34PM ET
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Exxon Regular is 0.75
travis turner
travis turner Apr 20, 2020 10:34PM ET
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thatu0027s too high
 
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