Last week, oil prices saw a substantial drop-off, before beginning a climb back to more-positive values. However, this growth didn’t last. In fact, many experts anticipate these prices could continue to slip yet again in the upcoming weeks.
Both U.S. and international oil prices have been in flux all throughout the week. Last Monday, West Texas Intermediate reached a stunning negative $37.63 per barrel, trading negatively for the first time in history. This means that oil producers had to pay traders to take in orders of oil. This week, Brent crude fell to $19.58 per barrel, its lowest value since 1999. U.S. oil futures led losses, falling by more than $4 a barrel on fears that storage at Cushing, Oklahoma, could reach full capacity soon. U.S. West Texas Intermediate CLc1 June futures were down $4.63, or 27.3%, to $12.31 a barrel at 1406 GMT.
The main cause behind the continuous decline of oil prices has been the ongoing COVID-19 pandemic and the subsequent lockdown policies countries are using. Major industries that usually require plenty of oil, such as gas and airliners, are now buying much less as people are unable to travel. This, in turn, drives down the demand, leaving oil companies with large amounts of surplus.
“The market knows that the storage problem remains and we are on a calculated path to reach tank tops in weeks. Prices can’t do anything else but decline when producers won’t have anywhere to store oil soon,” Rystad Energy head of oil markets Bjornar Tonhaugen said.
Still, the problems don’t end there. Oil companies are facing the prospect of running out of storage for their excess oil. The main storage facility in the U.S. at Cushing, Oklahoma is expected to be full in a few weeks. 160 million barrels of oil are estimated to be stuck on transport ships, now converted to floating storage facilities. Even with OPEC and Russia coming to agreements to cut production, it still isn’t likely to be enough.