Brent crude tumbles overnight to lowest oil prices since millennium
The price of worldwide benchmark Brent crude tumbled overnight as the global rout of oil prices continued on fears that storage space is rapidly running out.
At its nadir, Brent crude fell over 18 per cent to $15.98, a level last seen before the turn of the millennium in mid-1999.
As trading opened in London, Brent crude had clawed back about $1 to stand at $16.90.
Analysts said the worldwide oil crisis was a major factor behind the UK’s inflation rate falling from 1.7 per cent to 1.5 per cent today.
Laura Suter, personal finance analyst at AJ Bell, said: “Even before the recent capitulation, the price of oil was on the slide in March and this dragged inflation down slightly.
“Oil prices have a massive impact on the UK’s inflation rate and with prices at the pump and home energy costs getting cheaper we’d expect this trend to continue for the next couple of months”.
Brent crude collapse follows WTI plunge
The collapse in the Brent crude price came after the historic rout of US standard West Texas Intermediate (WTI). WTI flipped into the negative this week as traders sought to offload contracts to take delivery of oil in May.
With demand at lows not seen since the mid-1990s, and nowhere to store oil, producers resorted to paying traders to pick up the contracts.
President Donald Trump tweeted a pledge to make funds available to protect the ailing US domestic market yesterday. But the WTI June contract was heading in the same direction last night.
The US’ main storage facility at Cushing in Oklahomais expected to be full by early May. But there is still no end in sight for the demand slump. Those factors have already prompted a new sell-off to commence.
That is expected to send oil prices tanking again. As of this morning, the June WTI futures contract was down over eight per cent at $10.56.
The oil prices crash has been exacerbated by a slower-than-expected pick-up in demand in Asia. That is despite Asian countries cautiously lifting coronavirus lockdown measures.
Analysts will be carefully watching for an update on oil storage capacity from the US Energy Information Administration today. Inventories are expected to rise again to record levels.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said: “A consensus of analyst expectations points at another 16.1m barrel increase last week. [That] would only confirm the deepening oil storage crisis in the US and hinder the potential of a positive recovery.”