Singapore | Brent crude from the North sea plunged Wednesday in Asia of more than 12%, less than 17 dollars per barrel, and the american oil has erased early gains and dropped him also, in a market ravaged by the pandemic of Covid-19.
In early trade in Asia, the Brent is mounted, on the basis of information on discussions between producers, and the raw american West Texas Intermediate (WTI) was also on the rise. But the trend is suddenly reversed.
The Brent has lost 12,31% to 16,98 dollars per barrel. And the WTI for delivery in June, which had rebounded some 20% at the open, was in the afternoon with a decrease of 5% to 11 dollars per barrel.
“The gloomy sentiment will certainly maintain the price floor in the short term, until we see the light at the end of the tunnel with the gradual recovery of economic activities at the stop around the world,” said Jingyi Pan, a strategist at IG.
The chaos in the crude oil market “simply reflects the underlying idea that there is no demand for the oil physical and that there is no place to store it,” said Stephen Innes, of Axicorp.
For him, “the disappointment that followed the new agreement on a reduction of production) continues to resonate, and the answer to this protest might be the only thing that could revive the oil prices in the short term, in the absence of indications of a recovery in demand”.
The crisis on the crude oil market triggered by the pandemic has been aggravated by a price war between Russia and saudi Arabia, and although the two countries have put an end to their argument and are eventually joined with other producers to conclude an agreement on a reduction of 10 million barrels per day, but this was not enough to calm down the situation.
Stephen Innes added that the oil crisis “has negative connotations on other areas of the market, including banks, given their high level of exposure to american producers of shale oil”.
The oil market is ravaged by the restrictions put in place around the world to stop the spread of Covid-19. With transportation severely restricted, and many plants shut down, the energy demand has collapsed. The refineries have significantly slowed down their pace and stop buying as much crude.
The price of a barrel of WTI for may delivery, in which the negotiation has expired on Tuesday, fell on Monday for the first time in negative territory, investors are reduced to pay the buyers to sell their crude at the risk of ending up with barrels in their backyard.