The Coronavirus crisis has hugely decreased the demand for energy across the globe due to the lockdowns imposed and the unprecedented halt to economies. The drop in oil prices has come as countries try to come up with lockdown strategies to restart the economy safely. Prices on the May contract for West Texas Intermediate crude futures fell to $14.84 (£11.91) a barrel – it’s lowest price since May 1999.
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There is growing concerns that the oil storage facilities in the US could run out of capacity.
There have been stockpiles at Cushing, which is the main delivery point in the US for oil.
Once capacity has been reached, producers will be forced to cut their output.
US crude oil demand has massively dropped (Image: GETTY )
Global lockdowns have meant a huge drop in oil demand (Image: GETTY )
ANZ’s Daniel Hynes described the situation stateside as “quite dire.”
Dutch investment firm ING’s commodities strategist said the plunge in oil prices has meant US oil producers have halted their rigs.
ING’s Warren Patterson and Wenyu Yao said: “Over the last month, the total number of active oil rigs in the US has fallen by more than 35 percent, highlighting the impact that the current low oil price is having on drilling activity.
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Donald Trump wants to restart the US economy (Image: GETTY)
“This drilling slowdown will translate into lower production in the coming months”.
Senior Commodity strategist at ANZ bank, Mr Hynes told CNBC: “There will be traders in the market who only want to trade the paper, so they will roll over into the next futures contract.
“That means selling the May contract and buying the June.”
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The price of oil is often an indicator of how the economy is doing (Image: GETTY )
The Office for Budget Responsibility warned of a recession to hit the UK due to COVID-19.
Last week they published a report warning that the economy could shrink by 35 per cent with two million job losses.
The OBR said: “The longer the period of economic disruption lasts, the more likely it is that the economy’s future potential output will be scarred.”
Chancellor Rishi Sunak has plunged billions of pounds into the economy to try and save people’s livelihoods, but he has warned he can not save every job.
London’s blue chip FTSE 100 index were up about 0.4 percent this morning on a more positive note.
European stocks were also up, with the pan-region EUROSTOXX 50 futures up 1.23 percent and German DAX futures gaining 1.26 percent.