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US Crude Slumps 6% to Lowest Level Since 2002

Summary:
Crude oil futures are trading at their lowest levels in nearly 20 years to start the trading week, driven by crashing global demand and a rallying US dollar. With Saudi Arabia set to unleash a tsunami of cheap oil for April deliveries, can crude prices crater to the low- to mid-teens? As the coronavirus pandemic continues to shut down economies all over the world, it may be some time before oil prices recover. May West Texas Intermediate (WTI) crude futures plunged 1.50, or 6.91%, to .01 per barrel at 13:57 GMT on Monday on the New York Mercantile Exchange. Oil recently crashed below a barrel, but it was brief and prices quickly climbed above the important threshold. Crude did slightly rebound last week, but it still suffered a 9% loss across the five sessions. Year-to-date, oil is

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Crude oil futures are trading at their lowest levels in nearly 20 years to start the trading week, driven by crashing global demand and a rallying US dollar. With Saudi Arabia set to unleash a tsunami of cheap oil for April deliveries, can crude prices crater to the low- to mid-teens? As the coronavirus pandemic continues to shut down economies all over the world, it may be some time before oil prices recover.

May West Texas Intermediate (WTI) crude futures plunged 1.50, or 6.91%, to $20.01 per barrel at 13:57 GMT on Monday on the New York Mercantile Exchange. Oil recently crashed below $20 a barrel, but it was brief and prices quickly climbed above the important threshold. Crude did slightly rebound last week, but it still suffered a 9% loss across the five sessions. Year-to-date, oil is down 67%.

Brent, the international benchmark for oil prices, is also cratering to its worst level since 2002. June Brent crude futures plummeted $1.85, or 6.62%, to $26.10 a barrel on London’s ICE Futures exchange.

On Sunday, President Donald Trump extended the nation’s social distancing, stay-at-home guidelines to ensure that the country can keep the COVID-19 death toll below 100,000. The announcement led to mounting fears that the coronavirus outbreak could impact international commerce heading into early summer, a trend that would weigh on crude oil.

Right now, global crude markets are suffering from oversupply and plunging demand. In addition to the US churning out 13 million barrels per day (bpd), Saudi Arabia is raising production levels to 10 million bpd – and it could reach its maximum capacity of 12.5 million bpd. But even if Saudi Arabia were to curtail operations and reach an agreement with the Organization of Petroleum Exporting Countries (OPEC) and other producers, the paucity of demand would still suppress prices.

Air travel is minimal, consumers are staying home, and non-essential businesses are not operating. As this continues to be the case in the near-term, crude consumption will hover near all-time lows.

The industry is beginning to prepare for bearish times ahead. In the US, the total number of oil and gas rigs is down 244 compared to a year ago, drilling permits are falling, and federal land lease sales are cratering. Many companies had been anticipating a lifeline from the US government in the $2.2 trillion stimulus package, but there was nothing in the legislation to cushion the blows. The overall sector is slashing $19 billion from its budget, and analysts warn the next round of cuts will involve jobs and capital expenditures. When that happens, the next step will be bracing for insolvencies.

A rebounding dollar is also weighing on oil. The US dollar advanced 0.79% to 99.14, from an opening of 98.31. The greenback has plunged more than 3% over the last week on the Federal Reserve’s multi-trillion-dollar quantitative easing actions. The buck is still up 2.85% YTD.

In other energy commodities, May natural gas futures are flat at $1.634 per million British thermal units (btu). May gasoline futures tumbled $0.08, or 14%, to $0.4929 per gallon. May heating oil futures shed $0.05, or 4.68%, to $1.0185 a gallon.

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Andrew Moran
I am a full-time professional writer. Prior to my self-employment, I worked as a reporter for Digital Journal covering the politics beat and The Toronto Times reporting on the city’s entertainment scene. I currently write mostly about business, marketing and finance

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