Too much oil, nowhere to put it: US crude plunges to 1 cent a barrel

When New York trading ended, WTI was in negative territory for the first time ever — minus $37.63 a barrel. (Reuters/FIle)
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Updated 21 April 2020

Too much oil, nowhere to put it: US crude plunges to 1 cent a barrel

  • When New York trading ended, WTI was in negative territory for the first time ever — minus $37.63 a barrel
  • Brent, the Middle East benchmark, also fell on worries about over-supply

DUBAI: American crude faced wipeout on Monday as US traders confronted the reality of a world awash with oil and nowhere to put it.

West Texas Intermediate, the US benchmark, sank like a stone for most of the day, hitting, then crashing through, historic lows. From a start above $18, at one point it was trading at a symbolic 1 cent a barrel — effectively worthless.

When New York trading ended, WTI was in negative territory for the first time ever — minus $37.63 a barrel, as traders were forced to pay others to take it off their hands.
“The May crude oil contract is going out not with a whimper, but a primal scream,” said oil analyst Daniel Yergin of IHS Markit.

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ANALYSIS: All eyes on next month as US braces for oil-crash fallout

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Demand for all energy products has been crippled by the COVID-19 pandemic, which has lopped about 30 per cent off normal daily requirements. Last week’s historic deal between Saudi Arabia and Russia in the OPEC+ alliance removed less than 10 per cent from global supply.

Brent, the Middle East benchmark, also fell on worries about over-supply. However, the decline was less severe, mainly for technical and logistics reasons, and it traded about 7 per cent down at about $26 per barrel.

Traders in Dubai told Arab News that factors related to the expiry date of contracts for physical delivery of oil in May hammered the WTI price. Those contracts expire on Tuesday and WTI may recover for the new contract for June delivery — provided there is a pick-up in demand.

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A more worrying sign for the American industry is that the giant storage facility at Cushing, Oklahoma, where most US crude is stored awaiting delivery, can take no more oil. “All the storage at Cushing is full,” the Dubai trader said.

Michael Tran, managing director of global energy strategy at RBC Capital Markets, said: “Refiners are rejecting barrels at a historic pace and with US storage levels sprinting to the brim, market forces will inflict further pain until either we hit rock bottom, or COVID clears, whichever comes first. But it looks like the former.”

The collapse in the price of US oil comes after President Donald Trump helped broker the OPEC+ supply deal,which he said would save “hundreds of thousands of jobs” in the US oil industry.

Since then, the American shale industry’s rig count, the number of wells in operation, has declined sharply as producers either cut production or went out of business.


India opens vast railway network to private players

Updated 02 July 2020

India opens vast railway network to private players

  • The 167-year-old train network carries 20 million passengers daily
  • India’s railway ministry said it would now permit businesses to run trains along 109 routes
MUMBAI: India has opened up its vast railway sector to private companies, allowing firms to operate trains on certain routes, in a bid to boost its stuttering, virus-hit economy.
The 167-year-old train network carries 20 million passengers daily but is plagued by deadly accidents, rickety infrastructure, lack of modern amenities and poor investment.
In an announcement late Wednesday, the railway ministry said it would now permit businesses to run trains along 109 routes, inviting bids from firms weeks after New Delhi opened up coal mining to the private sector.
“This is the first initiative of private investment for running passenger trains over Indian Railways network,” the ministry said in a statement.
“The objective of this initiative is to introduce modern technology rolling stock with reduced maintenance, reduced transit time, boost job creation, provide enhanced safety, provide world class travel experience to passengers,” it added.
The project will require an investment of $39.8 million and private players will have to pay the government fixed haul charges and a percentage of profits determined during the bidding process.
Prime Minister Narendra Modi has sought to privatize a range of industries that have been under state control for decades, sparking criticism from the opposition Congress party.
“Now the government is in a desperate mood to sell a great chunk of one of our largest national asset #IndianRailways,” Congress politician Adhir Ranjan Chowdhury tweeted.
“Privatization cannot be construed as a panacea of railways malady,” he added.
The tottering network is notorious for accidents, with 15,000 passengers killed every year according to a 2012 government report that described the deaths as a “massacre.”
Asia’s third-largest economy has been clobbered by the pandemic and a months-long lockdown, growing at its slowest pace in at least two decades last quarter.
The shutdown, which put millions out of work overnight, is widely expected to plunge the country into recession.
Fears for the economy prompted the government to allow many businesses to resume operations starting last month despite an ongoing increase in infections, which have now crossed 600,000.
Even before Modi announced the lockdown in late March, the economy was struggling to gain traction with sluggish growth, record unemployment and a flurry of bad loans making banks reluctant to lend.