US oil prices fell 20% as global demand decreases amid COVID-19

United States Oil Prices on Tuesday witnessed the fall of almost 20% amid intensifying fears about dwindling storage capacity worldwide.

Media reports said West Texas Intermediate, the U.S. benchmark, slipped over 19%, or $2.5, to trade at $10.22 per barrel, while international benchmark Brent crude traded 4.5% lower at $19.09 per barrel.

Economy Experts say that the global pandemic of novel coronavirus has erased as much as a third of global demand for oil.

Economy Experts  say “The June contract is falling due to the reality of demand levels being well below current production levels and limited storage options,”

“Choppiness in the markets will be significant as economies deal with lockdowns and returning to normal,” they added.

Prices also pressured on Monday after the United States Oil Fund, which trades under the ticker ‘USO’ and is popular with retail investors, said it would sell all of its contracts for June delivery beginning Monday, in favor of longer-term contracts.

According to Economists, “The move [by the USO] is a recognition of the bleak prospects for the US oil sector in May and June,”

As demand drops more and more producers have announced production cuts. But some believe it won’t be fast enough to combat the unprecedented fall-off in demand from the pandemic.

Earlier in April, OPEC and its oil-producing allies agreed to a record production cut that will take 9.7 million barrels per day off the market beginning Friday, while Exxon and Chevron are among the U.S.-based companies that have scaled back operations.

West Texas Intermediate and Brent are both on pace for their fourth straight month of losses for the first time in three years.