Oil prices fall by 5-6% and Brent by $23.37 a barrel


March 30, Fineko/abc.az. Oil of standard grades is cheapening in price in the course of Monday’s trading.

The price of May’s Brent crude futures on the London ICE Futures Exchange by 9 am is $23.37 a barrel, which is by $1.56 (6.26%) lower than the closing price of the previous session. Following the trading on Friday, futures fell in price by 5.4%, and the weekly drop was 7.6%.

WTI crude futures for May fell by $1.08 (5.02%) to $20.43 per barrel in electronic trading on the New York Mercantile Exchange (NYMEX) by 9 am. By the close of previous trading, the contract price had fallen by 4.8%.

Both contracts showed declines for five consecutive weeks. Since the beginning of the month their price has fallen by about 50%, MarketWatch writes.

The main influence on oil prices will be the dynamics of demand, which is expected to strengthen its record decline in the coming weeks, according to commodity analyst Robby Fraser of Schneider Electric, quoted by the publication.

According to Fraser, until demand begins to recover, any talks between Saudi Arabia and Russia on possible production cuts, as well as attempts by Riyadh to flood the market "will look relatively unremarkable compared to the scale of demand reduction." From 1 April the OPEC+ deal on the production cuts is terminated.

Meanwhile, falling oil prices have led to a substantial reduction in the number of active rigs in the U.S. for the past two consecutive weeks. American oilfield services company Baker Hughes reported on Friday that last week their number fell by 40 to 624 rigs.

WTRG Economics’ economist James Williams believes that the number of active rigs in the U.S. may fall below 500 rigs in May or June.

"How low the number of rigs is going to fall will depend on the duration of the virus's impact on the economy and whether OPEC can negotiate with Russia," he said.

In addition, analysts note the risks of running out of free space in oil storage facilities.

"According to industry data, the level of oil storage capacity has reached 75%, and further storage of oil with reduced demand will lead to a collapse in prices to $10 (per barrel) in the coming months, if production activity does not recover," says Mihir Kapadia, the head of Sun Global Investments.