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Oil prices crash less than $1 a barrel in the US market

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UPDATE: US oil price below $1 a barrel as storage capacity runs out. Benchmark collapses to unprecedented low as traders try to rid themselves of unwanted crude

Benchmark US oil prices headed to negative territory after crashing to one cent a barrel as the collapse in demand caused by the coronavirus pandemic leaves the world awash with oil and not enough storage capacity — meaning producers may soon be paying for buyers to take it off their hands.

West Texas Intermediate, the US marker, lost 99 per cent on Monday, with the price of oil for delivery next month sinking to record lows on warnings that traders were struggling to access storage capacity at the refinery hub of Cushing, Oklahoma, which is expected to be full within weeks.

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New York – US oil prices crashed Monday to a record low as the market continues to be roiled by an epic collapse in demand caused by the coronavirus pandemic. Global stocks are mixed as investors brace for more companies to reveal how much the crisis is costing them.

US oil futures were down as much as 78% at $4.04 a barrel, their worst levels since NYMEX opened oil futures trading in 1983. Monday’s plunge comes after prices hit an 18-year low last week as markets realized that record output cuts agreed by OPEC, Russia and other producers aren’t nearly enough to offset the loss in demand.

“It hasn’t taken long for the market to recognize that the OPEC+ deal will not, in its present form, be enough to balance oil markets,” wrote Stephen Innes, chief global markets strategist at AxiCorp, in a research note.

The May futures contract for West Texas International is about to expire, and frantic last minute trading is compounding concerns about how much oil the United States will be able to store as demand dries up, according to Bjornar Tonhaugen, head of oil markets at Rystad Energy. He said that is leading to these “large price swings.”

US oil futures for June fell more than 7% to $23.25. Brent, the global benchmark, slumped 3.9% to just below $27 a barrel.

Brent was down $1.50, or 5.3 per cent, to $26.58 a barrel by 12:16 p.m. EDT (1616 GMT), while the front-month May WTI contract fell $9.43, or 51.6 per cent, to $8.84 a barrel.

Prices have been pressured for weeks with the coronavirus outbreak hammering demand even as Saudi Arabia and Russia failed to reach an agreement to cut supply. The two sides, with U.S. urging, agreed more than a week ago to cut supply by 9.7 million bpd, but that will not quickly reduce the global glut.

Brent oil prices have collapsed around 60 per cent since the start of the year, while U.S. crude futures have fallen around 85 per cent, to levels well below break-even costs necessary for many shale drillers. This has led to drilling halts and drastic spending cuts.

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