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Benchmark Brent and US oil futures for June delivery plunged to around two-decade lows on Tuesday, a day after US May futures sank into negative territory for the first time in history as demand tumbled due to the coronavirus crisis.
Brent for June delivery, known as the front-month contract after the May futures contract expired, fell as low as $18.10, its lowest since November 2001. At 1200 GMT, it was down 18 per cent at $20.98. The June contract for US West Texas Intermediate (WTI) crude dropped 21 per cent to $16.14, after hitting its lowest since 1999. WTI for May, in which trading turnover is much lower, hit a negative $3.99, after Monday's dive below $0 for the first time, settling at negative $37.63 a barrel.
The slump in the US contract was exaggerated by the looming expiry later on Tuesday of the front-month contract for May. With the market oversupplied and storage facilities already brimming, holders of the contract for May delivery were in the unprecedented position of having to pay those taking the crude.
OPEC and its allies, including Russia, have announced sweeping cuts in production, amounting to almost 10 per cent of global supplies. But with economies virtually at a standstill due to coronavirus lockdowns, demand has dropped as much as 30 per cent.
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