U.S. benchmark oil for June delivery dropped 43% on Tuesday, suggesting that Monday's blowout in the May contract was more than just a technical blip.
The price of U.S. crude oil for June delivery fell by almost half Tuesday, and Brent, the international benchmark, dropped below $20 a barrel for the first time in 18 years as global oil markets remained under intense pressure.
Brent crude, meanwhile, extended its fall in afternoon trading in New York, touching a fresh low of $17.51 a barrel before recovering slightly to settle at $19.33 a barrel, down 24% on the day.The coronavirus pandemic has sent the oil sector into a state of crisis. Closures of businesses and restrictions on travel, meant to slow the spread of the virus, have slashed global demand for crude by as much as a third this month compared with pre-crisis levels.
“The contagion has spilled over” to the June contract, “which could also be well on [its] way into the red as we move towards physical delivery dates,” said Louise Dickson, an analyst at Rystad Energy.Plans for unprecedented supply cuts by some of the world’s biggest producers such as Saudi Arabia and Russia have so far failed to offset the tumble in oil demand.
Russia downplayed the collapse in crude prices, saying there was no need to view it as an “apocalyptic” event after the nation’s Ural blend, which is loosely based on Brent, fell to its lowest level since 2002.“The chaos with futures is absolutely speculative, just a trading issue,” Kremlin spokesman Dmitry Peskov said. “Of course there is no need to give this an apocalyptic hue.”
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