Oil plunges to lowest since 1986 amid historic glut

Oil plunged to the lowest level since 1986 as a deadly pandemic ravaging global economies threatens to erase an entire decade of demand growth, slashing thousands of jobs and wiping out hundreds of billions of dollars from company valuations.

Traders fled the May contract ahead of Tuesday’s expiration. Industrial and economic activity is grinding to a halt as governments around the globe extend shutdowns due to the swift spread of the coronavirus. Oil has faced its own knock-on effects with a market massively oversupplied and nowhere to put physical barrels. Despite the unprecedented output deal by OPEC and allied members a week ago to curb supply, it’s become too little too late in the face of pandemic lockdowns reducing global crude demand by about a third.

“There is little to prevent the physical market from the further acute downside path over the near term,” said Michael Tran, managing director of global energy strategy at RBC Capital Markets. “Refiners are rejecting barrels at a historic pace and with U.S. storage levels sprinting to the brim, market forces will inflict further pain until either we hit rock bottom, or COVID clears, whichever comes first, but it looks like the former.”

See also: Wild Oil Market Set for Extra Volatility as Contract Expiry Near

Since the start of the year, oil prices have fallen by more than 80%, or $50 a barrel, after the compounding impacts of the coronavirus and a breakdown in the original OPEC+ agreement. With no end in sight, and producers around the world continuing to pump, that’s causing a fire-sale among traders who don’t have access to storage.

There are signs of weakness everywhere. Buyers in Texas are offering as little as $2 a barrel for some oil streams, raising the possibility that producers may soon have to pay to have crude taken off their hands. The spread between the nearest two contracts for the U.S. benchmark has fallen to its weakest level on record. In Asia, bankers are increasingly reluctant to give commodity traders the credit to survive as lenders grow ever more fearful about the risk of a catastrophic default.

https://www.msn.com/en-us/money/markets/oil-suffers-record-plunge-below-11-amid-historic-glut/ar-BB12Taj9