U.S. oil prices plunge below zero amid coronavirus pandemic

Marco Green
May 23, 2020

Oil prices rose on Friday, but were on course for their third straight weekly loss as production shutdowns failed to keep pace with the collapse in demand caused by the coronavirus crisis.

With scarcity to store crude oil, the USA benchmark West Texas Intermediate for May delivery ended trading at -$37.63. Brent crude, the worldwide benchmark, was also up by nearly five percent to $21.33 a barrel.

Oil prices in the United States plunged to below zero on Monday as demand collapsed amid the coronavirus pandemic.

Under a deal agreed between the Organization of the Petroleum Exporting Counties and other producers including Russian Federation and Azerbaijan, a grouping known as OPEC+, output cuts of 9.7 million barrels bpd should take effect from May.

The war ended in a tentative truce last week, as OPEC, Russia and other oil producers agreed on cutting production by 10 million barrels a day, starting in May.

Kuwait, and Algeria announced the beginning of a decline in production even before the entry into force of the agreement OPEC+.

"Despite the OPEC+ alliance agreeing to an unprecedented cut in output, the physical market is awash with oil", it said, referring to the OPEC and non-OPEC partners.

There are also plenty of supplies from the Middle East with no buyers as "freight costs are high", he said. Donald Trump has pledged to support America's oil and gas industry - we look at what measures could be in store.

The Gulf is a major gateway for oil to reach worldwide markets, and spikes in US-Iran tensions typically drive prices higher.

The prices of West Texas Intermediate (WTI), the USA oil benchmark, and Brent crude, the global oil benchmark, hit record lows not seen since April 2009 on Tuesday.

AxiCorp global market strategist Stephen Innes said it was "probably rational to temper expectations as it's going to take more than a celestial alignment to get WTI to stick above $15 per barrel this month, let alone super tack to $20".

Other reports by Click Lancashire

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