Oil plunged to a record low on Monday. The commodity’s latest round of sharp selling comes as uncertainty mounts around storage for excess oil. Demand for crude has plummeted since the coronavirus outbreak has frozen activity worldwide.
The price of West Texas Intermediate crude oil futures expiring in May plunged as much as 99% to 1 cent a barrel, its lowest level on record. Brent crude losses were muted by comparison, with the commodity sliding 7.4% to $26 a barrel at intrasession lows.
The price of oil has continued to slide even after OPEC and its allies agreed to the biggest-ever production cut — one intended to backstop prices. Investors remain unconvinced the cuts can offset cratering demand for the commodity as the novel coronavirus keeps society from operating normally.
Concerns around storage come as WTI crude for May delivery trade at large discounts to longer-dated contracts. That dynamic is playing out amid worry that a key storage hub in Cushing, Oklahoma, is nearing capacity, according to Bloomberg.
“Basically, bears are out for blood,” said Naeem Aslam, the chief market analyst at AvaTrade. “The steep fall in the price is because of the lack of sufficient demand and lack of storage place given the fact that the production cut has failed to address the supply glut.”
He added: “The bottom line is that there is no doubt that oil prices are way oversold at the current level, but given the circumstances, it is likely that the price may continue to fall further because the rig count hasn’t touched its bottom yet.”