Oil prices plunge again, WTI down 20% on supply glut

New Delhi, April 28 (IANS) US oil prices tumbled again on Tuesday with the June contract of WTI crude on the NYMEX falling nearly 20 per cent amidst a supply glut and storage concerns.

The June Contract of WTI is currently at $10.24 per barrel, lower by 19.87 per cent from its previous close.

The plunge in US oil prices has come on the back of renewed concerns of decline storage capacity as supply continues and demand remains nearly standstill.

The latest plunge in the WTI crude in the US, comes a week after it fell below zero for the first time ever.

The decline comes despite the recent output cut agreement between the Organization of Petroleum Exporting Countries (OPEC) and its allies. There were hopes that agreement would stabilise oil prices, but with the Covid-19 pandemic continuing, there has been a large slip in demand that is not letting oil prices to pick up.

The current market is oversupplied on shrinking demand, creating a situation of free fall for crude.

The price of oil has now reached a point that it is increasingly becoming difficult for higher cost producers to remain in operation and rather look at declaring bankruptcy. A lot of US shale producers are in deep trouble and analysts expect that low oil price for few more months willresult in a spate of bankruptcies in US.

With world demand now forecast to plunge by over 20 million barrels per day, a 30 per cent drop from last year, analysts say massive production cuts will be needed beyond just what has been agreed between the Organization of the Petroleum Exporting Countries (OPEC), Russia and other producers.

Brent crude oil also has declined and its June contract on the Intercontinental Exchange (ICE) is at $19.21 per barrel, lower by 3.90 per cent from its previous close.

The fall in Brent prices augurs well for India as it comprises over 25 per cent of India’s imports. Rest of the Indian basket includes crude from the Gulf region, Oman, also, some crude is imported from Venezuela and nominal amount from the US.

–IANS

rrb/sn