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Business / OIL

Oil plunges for a second day on gloomy outlook

The UK benchmark for oil has slumped 10% to around $16 (£13) a barrel in another day of declines.

It comes after the price of West Texas Intermediate (WTI), the benchmark for US oil, fell below zero for the first time ever earlier this week.

The falls are a striking illustration of just how much economic activity has slowed around the world.

Prices have weakened sharply because of a combination of events triggered by a collapse in global demand.

The knock-on effect has been a supply glut and a worldwide shortage of storage space for oil.
 

Storage issues

"This is an unprecedented demand drop. Nobody in their lifetime has seen anything like this," said James McNally of Third Bridge Group.

The collapse in physical demand for crude products like petrol and jet fuel has left storage hubs at capacity or, as one trader put it: "They're close to the brim."

Storage at US oil hub Cushing has already grown to more than 15 million barrels in the past month - and is expected to soon be at capacity for the first time ever.

"Coronavirus is rewriting the rules of the global economy in front of our very eyes," said Adam Vettese, analyst at eToro.

"With oil demand virtually non-existent, this quite amazing sell-off is almost entirely down to fears over storage."

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