As the COVID-19 outbreak continues to wreak havoc across the world’s economies, demand for oil has plummeted so much that prices for crude have hit a two-decade low.
The U.S. benchmark, West Texas Intermediate (WTI), has plunged to the $15 range as global economies and industry remains on lockdown. The international benchmark, Brent Crude was also down to $27.86 a barrel, according to reports.
Oil Demand Crushed
In Monday’s Asian trading session WTI plunged over 20 percent to $14.47 a barrel, marking the lowest level since 1999. According to industry analyst Jason Gammel, the oil industry faces “the bleakest oil macro outlook since at least the late 1990s and perhaps ever”.
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According to the Financial Times, today’s dump has been driven by the imminent expiration of the WTI May futures contract on Tuesday.
The situation has got so bad that the Department of Energy is even considering paying domestic oil producers to keep crude in the ground as global oil storage approaches its limits.
An OPEC-backed deal to cut roughly 10% of global crude supply has done little to prevent the price plunge. The energy cartel and its global partners agreed upon a 9.7 million barrel per day cut, however the market reaction indicated that this was not enough.
Founder of oil market analysis firm Vanda Insights, Vandana Hari, stated;
“The current prices show that the OPEC+ cuts proved to be a blip, with oil prices at the mercy of the virus once again. Until we approach a lifting of the lockdowns in the U.S., oil may drift lower or remain rangebound around current levels.”
Equity markets in Asia were also under pressure on Monday as indexes in China, Japan and Australia all fell. Last week, US stock markets were buoyed by the apparent effectiveness of a new COVID-19 drug but that momentum may be reversed today if they follow oil and Asian markets.
Other Commodities Correcting
From a seven-year high of $1,757/oz last week, gold prices have also started to correct according to the charts. By Monday morning prices had dropped almost 5% to $1,670/oz.
Analysts have concurred that the charts are bearish at the moment and further losses could be on the cards. A fall to $1,650 is likely in the short term though the longer-term outlook for the precious metal is bullish.
Silver is trading at around $15.20 today which marks a 30% recovery from its crash to below $12 in mid-March.
Bitcoin, which trades over the weekends, has returned to resistance in the low $7,000 range and added 2% over the weekend.
