U.S. oil prices have fallen to their lowest level in over 21 years as storage space for crude becomes an issue.
According to a report by CNBC, U.S. oil prices crashed to their lowest level in more than 21 years on Monday, with crude storage facilities running out of space in response to the fall in demand. The May contract of US West Texas Intermediate (WTI) futures fell to $12.43 a barrel on Monday, down 31% to its lowest level since March 4, 1999.
The plummet for oil prices comes amidst the sharp decline in demand generated by the coronavirus pandemic.
Bjarne Schieldrop, chief commodities analyst at SEB, told CNBC,
The current forward crude oil curves for Brent and WTI are now in very deep contango, but the contango is also very front-loaded.
He continued,
The curves are saying we have a big problem with the storage of oil right now.
Despite the short-term storage crisis for oil, Schieldrop predicted a turnaround in the second half of the year. He told CNBC he expects oil demand to rebound strongly by the end of 2020 and pointed to the Brent crude average oil price for 2021 holding up “well” at $40 a barrel.
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