A growing global oil glut continues to hit prices with panic spreading through the markets. Image by REUTERS PHOTO

Energy

Oil prices tumble on demand collapse

2020-04-23 16:34:56

Oil prices have slumped again with Brent falling to the lowest since 1999, as the market struggled with a massive crude glut amid a collapse in demand for everything from gasoline to jet fuel, caused by the coronavirus outbreak.

Brent crude, which fell 24 per cent in the previous session, touched $US15.98 ($A25.27) a barrel, its lowest since June 1999. It was trading down $US2.70, or 14 per cent, at $US16.63 at 1432 AEST.

West Texas Intermediate was down 68 cents, or 6 per cent, at $US10.89 a barrel.

The falls come on the heels of two of the wildest days in the history of oil trading, as worldwide supply looks set to overwhelm demand for months to come and current production cuts fall far short of offsetting that glut.

The front-month US contract fell into negative territory for the first time in history on Monday and set a record for the number of contracts traded on Tuesday.

Oil prices have slumped by around 80 per cent this year as the pandemic has spread across the world, killing nearly 180,000 people, routing financial markets and leading to potentially the worst economic meltdown since the depression of the 1930s.

The viral outbreak has caused fuel demand to drop by roughly 30 per cent worldwide and energy companies in the United States, the world’s biggest producer, are scrambling to find storage for excess oil. 

The volatility in the oil market has prompted CME Group, the world’s biggest commodities exchange, to raise margins on crude oil futures.