Oil market falls again as ‘tank top’ looms

Oil market  falls again as ‘tank top’ looms
What really spooked crude markets was a report from Goldman Sachs that oil storage facilities would hit “tank top” — maximum capacity — by the middle of May. (AFP)
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Updated 28 April 2020

Oil market falls again as ‘tank top’ looms

Oil market  falls again as ‘tank top’ looms
  • WTI fell 26 percent
  • Historic cuts by OPEC+ producers begin at the end of this week

DUBAI: Oil prices crashed again in global trading on Monday amid predictions that by the middle of next month the world’s storage would be full to the brim.

West Texas Intermediate, the US standard, fell 26 percent to $12.20 a barrel — heading toward the catastrophic negative levels of last week. Brent, the Middle East benchmark, fell below $20 in European trading, down 9 percent at $19.60.

Continuing worries about the economic downturn cased by the coronavirus pandemic were not dispelled by hopes of relaxation of lockdown in many countries.

But what really spooked crude markets was a report from Goldman Sachs that oil storage facilities would hit “tank top” — maximum capacity — by the middle of May.

Another big US bank, JP Morgan, said US oil companies would close down 1.5m barrels a day of production in June, more than 10 percent of total US output, as demand and storage left them with no alternative.

“It will take another couple of months at least to get any kind of supply-demand balance,” said Matt Stanley, senior broker in Dubai at global trading firm Starfuels. “There needs to be some action by the suppliers. We can’t just wait for default bankruptcies to correct the market.”

Historic cuts by OPEC+ producers begin at the end of this week, but experts fear they will not be enough to compensate for the dramatic reduction of demand. The Brent contract for June expires on Thursday, which is likely to exert further pressure on prices.

Bankruptcies among small to middle-ranking US oil companies are accelerating. President Trump has pledged to support the industry, but there are doubts his measures will get through Congress.