American oil deepens its losses to $ 14 a barrel

Oil prices fell on Monday, amid signs that global storage capacity was rapidly filling up, raising concerns that production cuts would not come fast enough to make up for the collapse in demand from the Corona pandemic.

The losses led the US oil futures contracts, which fell more than two dollars a barrel due to fears that the storage capacity in the Cushing Center in Oklahoma to reach maximum capacity.

The price of US West Texas Intermediate crude fell 16.1% to $ 14 today, Monday.

Large stocks

US crude inventories rose to 518.6 million barrels in the week ending April 17, nearing an all-time record high of 535 million barrels recorded in 2017.

Futures trading on oil recorded losses for the third week in a row last week, and decreased in eight of the previous nine weeks. Brent ended the week down nearly 24%, and West Texas Intermediate lost 7%.

70% of the storage capacity was filled at Cushing Center, the US Texas West Texas crude delivery point, by mid-April. Traders say the available energy is already rented.

Price support plans

Producers may not reduce production quickly enough or with sufficient volume to support prices, especially when global economic output is expected to decrease by 2% this year, which is worse than what happened during the financial crisis, while demand for crude collapsed by 30% due to the pandemic.

In light of seeking to reduce production quickly, the number of oil drilling rigs operating in the United States fell to the lowest level since July 2016, and the total number of oil and gas rigs in Canada fell to the lowest level since 2000, according to Baker Hughes data.

Yesterday, US Treasury Secretary Stephen Mnuchen announced that the White House was considering granting loans to oil sector companies directly affected by the drop in oil prices, stressing at the same time that the economy “will recover” during the third quarter of the year.

Mnuchin told “Fox News” that lending to energy companies is an option “we are looking closely at,” stressing in return that the US administration will not undertake “any financial rescue operation benefiting the shareholders.”

President Donald Trump announced on Tuesday that he had asked his administration to draw up an emergency aid plan for the gas and oil sector.

The domestic quarantine measures imposed to contain the outbreak of the new Corona virus have paralyzed the transportation sector and factories in most parts of the world, leading to a collapse in energy demand.

Mnuchin announced during a press conference on Friday, in response to a question about the possibility of the US government taking stakes in energy sector companies in exchange for granting financial aid, that this is one of the options presented, according to news agency “AFP”.

On the other hand, the minister considered Sunday that the American economy “will recover well in July, August and September” after gradually resuming its activities during “May and June”.

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