The price of oil tumbled again this morning as demand continues to dry up amid the coronavirus crisis, triggering fears over the US’s capacity to store supply.
West Texas Intermediate — the US oil benchmark — has sunk 12.5 per cent to $11.18 (£9) in early trading today (April 28).
According to FTAdviser’s sister paper, the Financial Times, the drop in US prices was triggered by the largest oil-backed exchange traded fund, the United States Oil fund, starting to sell off its holdings.
It has filtered through to other markets and the international benchmark, Brent Crude, has slipped 4.3 per cent to $19.13 (£15.41) this morning. Before the coronavirus crisis impacted the cost of oil in March this year, such prices had not been seen since 2002.
BP and Shell have seen 1.6 and 0.8 per cent shaved from their respective share prices since the price of oil dropped today.
Such small share price drops for the major oil firms mean the markets have been resilient to the latest oil price dip and the FTSE 100 is flat since it opened this morning.
Global oil markets have been upended over the past few weeks. Last week the price of WTI turned negative for the first time in history. At one point during trading on April 20, desperate producers were paying buyers $40 a barrel to take their oil.
The dramatic fall was on the heels of WTI costing around $14.50 (£11.60) a barrel, which at the time marked its lowest price tag since 1999.
Coronavirus lockdowns across the globe have limited both domestic and international travel, meaning demand for oil has fallen through the floor and producers are scrambling to find somewhere to store it.
The price of WTI has tanked 82 per cent over one year while Brent Crude has fared little better, dropping 73 per cent over a 12-month period.
Oil prices were hit earlier this year by an excess of supply due to the price war between Saudi Arabia and Russia.
In March Russia broke its partnership with Opec, prompting Saudi Arabia to launch an aggressive price war targeting the rival producer by ramping up production and offering big discounts.
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