The May contract for U.S. West Texas intermediate crude oil which expires on Tuesday, dropped 39.74% to $11.07 per barrel as of 9:34 a.m. ET Monday. The June contract for the commodity dropped 12.23% to $21.97 per barrel.
“It should be noted however that near-term WTI prices are trading at massive discounts to later-dated contracts – primarily due to concerns about the storage hub in Cushing [Oklahoma] filling to capacity,” Deutsche Bank analysts wrote in a note Monday.
Prices for Brent crude oil, the international standard, also fell Monday morning, albeit by a less extreme margin than prices for U.S. oil. Brent was down 6.55% to $26.24 per barrel.
“With a huge surplus in crude products filling inventories on land, there is a clear benefit to those producers whom are able to put their oil out to sea,” Joshua Mahony, senior market analyst at IG, wrote in an email. “Unfortunately, the lack of demand and landlocked nature of production in the U.S. and Canada has already started to provide negative prices across a number of crude products in North America.”
The declines extend a months-long drop for the commodity prices, which have been anchored both by fears of a supply glut and demand destruction due to the coronavirus pandemic.
Over the weekend, coronavirus cases topped 2.3 million globally, and the death toll rose above 164,000, according to Johns Hopkins data. U.S. confirmed cases totaled more than 755,000.
In New York state, the U.S. epicenter for the outbreak, Governor Andrew Cuomo said during a Sunday briefing that data showed the region was “past the high point” of the pandemic. The death toll rose by 507 as of Saturday, or well below the levels of over 700 daily new deaths reported about a week ago. New hospitalizations fell from the previous day to 16,213, from 16,967.
Last week, the Trump administration outlined a three-phase plan for states to each gradually bring businesses and other daily operations halted during the pandemic back online. Still, individual state officials have been hesitant about announcing a near-term easing of social distancing standards in absence of widespread testing or viable treatment or vaccine. Northeast states led by New York last week extended social distancing measures to at least May 15.
Distancing measures have helped keep new coronavirus cases in check but also contributed to broad economic stress in the U.S., triggering a staggering 22 million individuals to file for unemployment insurance over the past four weeks alone. Even when distancing begins to let up, many economists warn recovering these losses will take time.
“A double-digit rebound in GDP growth in the third quarter still seems like a decent bet, but it won’t recover all the lost ground,” Ian Shepherdson, chief economist for Pantheon Macroeconomics, wrote in a note Sunday. Shepherdson’s anticipation is for a 30% annualized drop in GDP in the second quarter, a margin about in-line with many other economists’ grim outlooks for the quarter.
“That can’t happen if, for example, restaurants have half the seating density than in the pre-virus era, cinemas can sell only one third of their seats, and airlines have to leave the middle seat empty,” he added. “No matter how much fiscal stimulus Congress pumps in—and more is coming—earnings across wide swathes of the economy will be crushed for an extended period.”
U.S. policymakers have been working on providing further relief to the small businesses hit hardest by the coronavirus. During an interview with CNN Sunday, Treasury Secretary Steven Mnuchin said congressional lawmakers were “very close to a deal” that would inject another $300 billion to the Paycheck Protection Program (PPP), which provides funds to help small-sized employers keep workers on the payroll as social distancing measures remain in place. House Speaker Nancy Pelosi echoed lawmakers’ nearness to reaching a deal for the additional funds in a separate interview Sunday.
The PPP first passed in Congress’s $2.2 trillion stimulus package late last month ran out of funds in less than two weeks.
— Yahoo Finance