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Huge surpluses of oil have pushed the price of oil to its lowest level since trading began in 1983. Oil stocks are “flooding,” says the analyst.
STUPER: US oil prices USA They are free. Here is an oil well in the Permian area of Texas.
SPENCER PLATT / GETTY IMAGES NORTH AMERICA
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– What now pushes the WTI oil directly to the ground is that the bearings are flooding. Price is trying to get producers to shut down because there is such a huge imbalance between consumption and production, says commodities analyst Bjarne Schieldrop of SEB.
The price of US light oil (WTI) with May delivery fell more than 70 percent to $ 4.66 a barrel on Monday afternoon. Never before has the price of US oil. USA It had been lower, according to historical data from the US Energy Agency. USA
Converted to Norwegian kroner means you can now buy a barrel of WTI oil for just under 50 kroner.
It is also the largest percentage drop in history, according to Bloomberg.
By January, the price was above $ 62 a barrel, but the viral crisis that is now sinking oil demand has caused prices to drop.
The North Sea oil price also falls on Monday, but is still around $ 27 a barrel.
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The crisis of the crown in the oil market.
– Extremely stressed market
According to oil analyst Helge André Martinsen of DNB Markets, there are technical reasons behind the price difference in so-called front-end contracts, between American light oil and North Sea oil.
He says that large imbalances in the oil market make the effect stronger.
Contracts in the oil market are delivered at different times. There have been large price differences in contracts, where they have a lower price with little delivery time than contracts with a longer delivery time.
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Oil analyst Helge André Martinsen at DNB Markets.
DNB markets
Martinsen explains that the closest WTI contract will be delivered in May, while the closest contract will be delivered in June.
Also, the May contract for WTI expires Tuesday, and there is now little trade in this contract, the analyst notes.
– There are large price movements in relatively thin volumes in WTI. And there is a lot of contango on the market, so when you have different times on these initial contracts you can get absolutely insane price differences, which we don’t normally see.
Contango is a situation in which future oil prices are higher than current prices.
– The closer the oil is on time, the cheaper it will be. It has an extremely stressed market in the short term, says Martinsen.
– These effects can also be seen in a normal market, but they are so small that they are not usually reflected as much. But since the market is at an extreme not seen before, these effects are quite huge, he says.
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– lay the foundation for higher prices
Schieldrop at SEB also points out the different delivery months of the WTI and Brent contracts.
The analyst says that oil prices locally in the US USA And Canada has fallen further, noting that America’s oil shale oil producers are now dramatically reducing their activity.
– Stop drilling, stop finishing the wells, and also close the wells to try to achieve a balance in the market.
However, the low price of oil will lay the foundation for higher prices in the future, according to the analyst.
– We are now eliminating a lot of investment, destroying mass production. At some point, it is not known when consumption will return. So this adds to the ratio of much higher prices.
– It always goes from one extreme to the other. So the question is when the other limb will come, says Schieldrop.
