Crude oil prices continued their freefall on Monday with the WTI crude of US falling below the $20 per barrel mark briefly and benchmark Brent crude price touching its 18-year-low on fears that coronavirus-related shutdowns may continue for few more months, resulting in a further decline in fuel demand.
Currently, the West Texas Intermediate (WTI) crude is trading at $20.40 per barrel, lower by nearly 5.2 per cent from its previous close. Earlier in the session, WTI fell as low as $19.92.
Brent crude oil is at $22.84 a barrel, falling 8.4 per cent from its previous closing level after earlier dropping to $22.58, the lowest since November 2002.
The persistent fall can be attributed to both rise in supplies and declining demand. The coronavirus pandemic has almost brought the global travel industry to a halt, limiting demand for the commodity. Analysts now expect demand to slump considerably during the coming months which could put crude prices closer to $15 mark soon as the pandemic is expected to continue for a longer period.
Further, the surge in supply by Saudi Arabia, after the OPEC”s talks on deeper production cut with Russia failed, has added to the pressure on oil prices. The current market is oversupplied on shrinking demand, creating a situation of free fall for crude.
The price of oil has now reached a point that it is increasingly becoming difficult for higher cost producers to remain in operation and are rather looking at declaring bankruptcy. A lot of US shale producers are in deep trouble and analysts expect that low oil price for few more months will result in a spate of bankruptcies in US.
Global markets have been on a bear run, including the financial markets for the past few weeks owing to the concerns of a significant impairing of the world economy due to the coronavirus crisis.
With the inputs of IANS