The UK and international oil benchmark, sourced from the North Sea, has plunged on Tuesday to historic low of $19.17 (£15.59) per barrel for June delivery. It is the lowest value for the commodity since 2002.
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The June contract for Brent crude dropped in value on Tuesday morning.
Brent is still trading higher than American counterpart West Texas Intermediate (WTI) because of the international usage, which provides storage space elsewhere around the world.
Big oil importers like China, India and South Korea, are still happy to buy and stockpile Brent.
WTI is currently trading for May delivery at below -$40, the lowest value in history.
THE UK’S Brent Oil industry could follow the US in dropping to historic lows as coronavirus continue (Image: PA)
The UK and international oil benchmark, sourced from the North Sea, has plunged on Tuesday to historic low of $19.17 (£15.59) per barrel for June delivery. (Image: PA)
Sky News’ Ian King explained however that if the supply and demand imbalances created by the pandemic persist, it’s likely that Brent will see a similar drop.
He scribed why investors had bought May delivered WTI oil when prediction’s held that the commodity would drop in value.
He said: “The likeliest explanation is that some of them may have been betting on a recovery in crude prices in May.
“That seemed possible when the OPEC cartel of oil producing nations, along with other producers such as Russia, agreed to production cuts on a scale never seen before.”
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The June contract for Brent crude dropped in value on Tuesday morning. (Image: PA)
He continued: “However, in recent days, it has become obvious that demand has collapsed by a good deal more.
“The International Energy Agency said last week that it believes demand in May will be around 29 million barrels a day lower than before the coronavirus crisis.
“Accordingly, the production cuts by OPEC and others will not be enough to bring supply back into balance with demand.
“And the extent of that ‘demand destruction’, in the jargon, means that there will continue to be downward pressure on prices at least in the short term.”
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John Browne, former boss of BP, told the BBC the current situation reminds him of the 1980s oil glut.
Prices will remain weak due to low demand, a high supply, and storage units for oil full
Browne explained: “The prices will be very low and I think they will remain low and very volatile for some considerable time.
“There is still a lot of oil being produced that is going into storage and not being used.”
John Browne, former boss of BP, told the BBC the current situation reminds him of the 1980s oil glut. (Image: PA)
Petrol prices are expected to stay relatively steady in the UK despite the turbulence in the value of oil.
The RAC motoring group said it expected petrol forecourts to try to hold their prices to help them stay afloat during a slump in sales of petrol and diesel due to lockdown restrictions on travel.
Simon Williams, a spokesman for the RAC, said: “In theory petrol prices could fall below £1 per litre if the lower wholesale costs were reflected at the pumps – but at the same time people are driving very few miles so they’re selling vastly lower quantities of petrol and diesel at the moment.
“This means many will be at pains not to trim their prices any further.”