Crude oil futures tanked for the fifth consecutive week as a steep drop in global demand and a supply glut continued to weigh on the energy industry. The oil and gas sector was not given a lifeline in the $2.2 trillion US stimulus bill, adding to its woes at the end of the trading week. This may be the final week of prices staying above $20 as Saudi Arabia is set to flood the market with cheap oil.
May West Texas Intermediate (WTI) crude oil futures tumbled $0.87, or 3.85%, to $21.73 per barrel at 18:58 GMT on Friday on the New York Mercantile Exchange. US crude will settle 5% lower for the week, adding to its year-to-date loss of 65%.
Brent, the international benchmark for oil prices, did slightly rise to close out the trading week. June Brent crude futures edged up $0.05, or 0.18%, to $24.98 a barrel on London’s ICE Futures exchange. Brent also finished the week down 8%, and it will close at its lowest level since May 2003.
Overall, oil endured its fifth consecutive weekly loss, despite a couple of sessions of modest gains this week. With the US government refraining from intervening in the energy sector and bailing out oil and gas producers, analysts are warning that American independent producers could be in store for a wave of bankruptcies and consolidations. Canadian companies are also on the brink of insolvency.
Global demand has taken a nosedive over the last month with the coronavirus wiping out consumption. Because of these trends, crude markets are awash in oil and will face a supply glut until the international economy recovers. The energy sector is also faced with a battle between Saudi Arabia and Russia, prompting the two countries to ramp up output. Riyadh is poised to raise production levels to 10 million barrels per day (bpd), and the volume could hit a maximum capacity of 12.5 million bpd.
The next concern is that the current OPEC+ production cuts expire next week, which could prompt a myriad of nations to expand production to ensure they do not lose market share. This is why analysts are sounding the alarm about prices cratering to as low as $5.
Even if there is a slowdown in output, experts anticipate a substantial surplus in the second and third quarters of this year. The International Energy Agency (IEA) says demand could plummet 20 million bpd amid the COVID-19 pandemic.
In other energy commodities, May natural gas futures shed $0.017, or 1.04%, to $1.62 per million British thermal units (btu). May gasoline futures picked up $0.035, or 6.58%, to $0.5795 per gallon. May heating oil futures rose $0.0172, or 1.64%, to $1.0675 per gallon.