By Ann Koh and Alex Longley
Futures in New York fell 3.2% to below $24 a barrel. Goldman Sachs Group Inc. warned that crude demand would decline by almost 19 million barrels a day next month, as American deaths from the virus topped 1,000 and India imposed the world’s biggest lockdown. Market gauges are already flagging weakness, with key swaps in the North Sea plummeting and U.S. traders concerned about storage space. Meanwhile, the price structure for both major oil benchmarks has collapsed, indicating a massive oversupply.
Crude prices are falling despite the U.S. Senate approving a $2 trillion stimulus plan after days of intense negotiations, putting pressure on the House to pass the bill quickly and send it to President Donald Trump for his signature. The White House is also urging Saudi Arabia to dial back its plan to flood the oil market. Still, refineries in India — the world’s third-largest importer of crude — are preparing to slash the amount they process to as little as half their normal rates, according to estimates from one of the country’s biggest Middle Eastern suppliers.
“We expect crude demand to now start declining, following products demand on its downwards path, and this is what will fundamentally drive prices lower,” said Per Magnus Nysveen, head of analysis at Rystad Energy AS.
Any agreement to curtail supply among producers will be too little and too late in the face of an unprecedented shock for the world’s oil refining system, Goldman said. Oil tanks are so full in the U.S. that at least one pipeline owner is concerned traders may try to stow away crude on its network until prices improve.
The glut extends far beyond the U.S. The Dated-to-Frontline swap, which helps traders to cover the gap between the futures and physical market in the North Sea was at the weakest level in at least a decade on Thursday. Similarly, Russian Urals crude traded at a 9-year low, and the country plans to boost its eastern exports to a record in May.
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