The fall in oil prices comes on the back of weak demand amid the coronavirus crisis. The pandemic has almost brought the global travel industry to a halt, limiting demand for the commodity which has fallen by almost a third this year. Further, concerns regarding storage have also weighed on the markets as global storage is nearly full.
Currently, WTI crude is trading at $14.78 per barrel, lower by 19.5 per cent from its previous close.
Brent crude was at $27.66, lower by 1.5 per cent from the previous close.
The decline comes despite the recent output cut agreement between the Organization of Petroleum Exporting Countries (OPEC) and its allies. There were hopes that agreement would stabilise oil prices, but with Covid-19 pandemic continuing, there has been a large slip in demand that is not letting a pick up in oil prices.
The current market is oversupplied on shrinking demand creating a situation of free fall for crude.
Soon after the OPEC-Russia talks on production cut failed earlier last month, crude had fallen by more than 25 per cent, the largest fall since the 1991 Gulf War, to $34 per barrel on March 9.
The price of oil has now reached a point that it is increasingly becoming difficult for higher cost producers to remain in operation and rather look 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.
With world demand now forecast to plunge by over 20 million barrels per day, a 30 per cent drop from last year, analysts say massive production cuts will be needed beyond just what has been agreed between the Organization of the Petroleum Exporting Countries (OPEC), Russia and other producers.
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.