The penny is now starting to drop, as the markets begin to respond negatively to leading Western governments’ risky self-imposed economic Lockdown policies in their reactionary attempt to contain the spread coronavirus crisis. The economic apocalypse about which experts were warning, but which government have been actively ignoring, is beginning to arrive.
The collapse in global oil prices is a direct result of the economic downturn triggered by government measures meant to ‘fight the invisible enemy’, leading global markets into their deepest depression since the 1930s.
As a result, demand for oil has dropped some 30% globally since the beginning of the COVID-19 crisis.
In the meantime, this may trigger more extreme volatility – and unpredictability, across major markets.
Covering these tumultuous markets, the Financial Times reports…
West Texas pump-jack (Image Source: Wikicommons)
Benchmark US oil prices headed to negative territory after crashing to one cent a barrel as the collapse in demand caused by the coronavirus pandemic leaves the world awash with oil and not enough storage capacity — meaning producers may soon be paying for buyers to take it off their hands.
West Texas Intermediate, the US marker, lost 99 per cent on Monday, with the price of oil for delivery next month sinking to record lows on warnings that traders were struggling to access storage capacity at the refinery hub of Cushing, Oklahoma, which is expected to be full within weeks.
(…) That means producers would be paying buyers to take their oil in order to delay the shutdown of their fields.
The price crash is the latest indication of the depth of the crisis hitting the oil sector. Lockdowns imposed in many of the world’s major economies have sent crude demand tumbling by as much as a third, leaving the industry facing what Jefferies analyst Jason Gammel called “the bleakest oil macro outlook” he had ever seen.
The collapse will be a blow to US president Donald Trump, who has gone to extreme lengths to protect the US oil industry, including backing moves by Opec and Russia to cut production. Physical grades in many North American regions have fallen into the low single digits reflecting a dearth of buyers able to take delivery of oil, even as prices for later contracts have held up marginally better due to some investors betting on an eventual rebound.
(…) Stephen Schork, editor of oil-market newsletter The Schork Report, said he expected access to storage capacity in the US to be exhausted within two weeks — and cautioned that the collapse of the country’s oil consumption was accelerating.
“It just gets uglier from here,” Mr Schork said, adding that sharply rising unemployment numbers meant fewer and fewer Americans would be driving, hurting petrol demand even during its peak summer months.
“This summer is dead on arrival. The biggest demand months are not going to happen,” he said.
(…) “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”…
Continue this story at Financial Times
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