Oil prices continue plunge as coronavirus keeps market in a chokehold

Oil prices continue plunge as coronavirus keeps market in a chokehold

Oil prices continued a historic plunge Tuesday as the coronavirus pandemic’s stranglehold on demand for fuel showed no signs of loosening any time soon.

June futures contracts for West Texas Intermediate crude oil plunged as much as 68 percent to $6.50 a barrel — the lowest price in at least 50 years. And the May contracts expiring Tuesday only managed to climb as high as $13.86 a barrel after turning negative for the first time ever Monday, a stunning development that meant traders were paying to get rid of the stuff.

Experts say prices will continue to plummet as long as lockdowns meant to curb the coronavirus prevent consumers from traveling while the world remains awash in oil with almost nowhere to store it — meaning they could drop below zero again in a month’s time.

“The situation’s only going to get worse until it gets better,” said Will Rhind, CEO of GraniteShares, which manages exchange-traded funds for commodities. “We’re still pumping an incredible amount of oil and so long as we keep these lockdowns in place or have our economy shut down, there’s no demand.”

The latest nosedive prompted President Trump to promise a financial lifeline Tuesday to American oil companies facing a grave financial threat from the low prices.

Trump said he instructed Treasury Secretary Steven Mnuchin and Energy Secretary Dan Brouillette to create a plan to make money available “so that these very important companies and jobs will be secured long into the future!”

“We will never let the great US Oil & Gas Industry down,” Trump said on Twitter.

Oil prices fell off a cliff over the past two months thanks to a mismatch between demand and supply. The coronavirus crisis has caused the world to use far less oil, but producers have not cut back on the amount they pump out of the ground. Saudi Arabia actually threatened to increase its output last month in a price war with Russia that has since been settled. Even a recent international agreement to cut back global production by 9.7 million barrels was deemed insufficient by the market.

The chaos in the global market has left American oil firms with a sort of Sophie’s choice: keep pumping oil that could be sold at rock-bottom prices, or take the expensive step of closing up wells. The latest disruption will likely force companies to choose the latter, according to Al Kluis, managing director of Kluis Commodity Advisors.

“It’s just been like a slow moving shipwreck,” Kluis told The Post. “The market is telling people even though it might hurt your profitability, short term you’ve gotta cap the wells.”

Oil prices outside the US haven’t been immune to the slump. June futures for Brent crude, the international benchmark, fell 31 percent Tuesday to a low of $17.51 a barrel, the lowest since 1999.

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