US oil prices crashed to a more than two-decade low as the coronavirus pandemic hits global demand for crude and raises concerns about storage facilities being overwhelmed.
In early Asian trading on Monday, West Texas Intermediate — the US oil benchmark — plunged as much as 20.8 per cent to $14.47 a barrel, marking the lowest level since 1999.
Jefferies analyst Jason Gammel said the oil industry faced “the bleakest oil macro outlook since at least the late 1990s and perhaps ever”, as he cut his forecast for WTI prices in the second quarter to $19 a barrel.
The continued fall in oil prices has come despite an Opec-backed deal to cut roughly 10 per cent of global crude supply. The reductions are planned to run until April 2022 as part of efforts to stabilise prices pummeled by the worldwide spread of Covid-19.
Monday’s fall was partly driven by the imminent expiration of the WTI May futures contract on Tuesday. Contracts for WTI delivery in June by comparison were only down 5.2 per cent to $23.72, partially supported by an influx of retail investors in recent weeks trying to pick the bottom in oil prices.
“I would certainly put the majority of the losses so far today down to the expiration,” said Robert Rennie, global head of market strategy at Westpac. “The risk is June WTI gets pulled below $20 in the next couple sessions.”
Brent crude, the international benchmark, was down only 0.8 per cent at $27.86 a barrel.
Equity markets in Asia were also under pressure on Monday. China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks fell 2.7 per cent even as Chinese banks lowered the loan prime rate, the country’s lending benchmark, by 0.2 percentage points to 3.85 per cent.
In Hong Kong, the Hang Seng index dropped 0.6 per cent, while Japan’s benchmark Topix fell 0.5 per cent and Australia’s S&P/ASX 200 shed 1.6 per cent.
Wall Street stocks ended last week higher, boosted by government support for economies hit by the pandemic. Futures tipped the S&P 500 to drop 0.5 per cent when trading begins later on Monday.
Sovereign bond prices rose, pushing down yields as investors looked for haven assets. The 10-year US Treasury yield fell 0.02 percentage points to 0.6386 per cent.