A rout in global oil markets continued on Tuesday, as traders in Europe caught up with extraordinary events in the US on Monday evening.
The price of a barrel of Brent crude oil dropped more than 29% to 19.82 US dollars per barrel, its lowest level since 1999.
It came the day after oil prices in the US briefly dipped into negative territory, meaning that buyers were being paid up to 40.32 dollars to take delivery of oil.
Demand for oil has dried up as international economies shut down to slow the spread of coronavirus.
This has meant that storage sites across the world have been filling up.
On Monday, storage had become so scarce in Texas that producers were paying buyers to take May deliveries of West Texas Intermediate (WTI) oil off their hands.
WTI is the most commonly used US standard for oil.
“We’ve had too much supply and too little demand for an extended period of time, and all of the oil storage capacity is currently in use,” said Rachel Winter at Killik & Co, an investment company.
She added: “Nobody wants to take delivery of oil next month because there’s nowhere to store it, so the price has dropped below zero.”
It comes as Government figures published on Tuesday show that fuel prices have fallen for 12 consecutive weeks.
The average price of petrol at UK forecourts is £1.09 per litre, which is the lowest since May 2016.
Diesel drivers are typically being charged £1.16 per litre to fill up. The last time it was that cheap was July 2017.
The number of motorists who can take advantage of the cheaper fuel is limited however, as the Government has ordered people to only go outside for food, health reasons or to commute if they cannot work from home.
Department for Transport figures show that road traffic is around two-thirds lower than normal.
Howard Cox, founder of FairFuelUK, said the average prices for litres of petrol and diesel should be 98p and 106p respectively, but they are around 10p higher.
Mr Cox claimed that even before Monday’s oil price collapse, the UK’s fuel supply chain had “dishonestly held back” falls in wholesale costs which took place last month.
UK fuel prices are unlikely to be affected by the fall in US oil. However, the drop in Brent crude could find its way to forecourts.
Contracts for Brent crude oil to be delivered, which had dropped on Monday, continued their fall on Tuesday.
However, Paul Danis at Brewin Dolphin, an involvement management firm, said that negative prices were not the new normal.
“Yesterday’s crazy move was not reflective of the true, albeit grim reality in the oil market,” he said.
The volatility in oil markets heaped pressure on the stock markets on Tuesday, sending the FTSE 100 down by 1.6% to 5718.91 points.
“Mining stocks were very much out of favour on Tuesday, dragging the FTSE 100 down,” said Russ Mould, investment director at AJ Bell.
“BHP, Evraz and Anglo American all fell by more than 5%, alongside similar weakness in oil producers Royal Dutch Shell and BP as the market worried about commodities demand.”