After a historic decline in the price of crude oil, US west texas intermediate(WTI) caught up the price whereas price of Brent crude oil remained low.
Due to Corona’s havoc, the price of US crude had gone down to zero in the last session in the international market due to lower demand than the supply of oil. However, after opening the May contract below zero at $ 14 per barrel on Tuesday, it remained at $ 1.65 per barrel with a strong recovery of $ 39.23. Crude oil prices on Monday fell to the lowest level of $ 37.63 per barrel – down from $ 0 per barrel in WTI. The business started with the price of 18. 27 dollars per barrel, but it fell to historical $ 1 and then zero and later to negative. For the first time after 1946, such a decline has been observed. At the end of the market, American West Texas Intermediate crude oil fell on Monday to a low of two dollars a barrel.
However, the June delivery contract has not seen such a big drop. Angel Broking Deputy Vice President Anuj Gupta explained the reason for this. He said that the agreement on production cuts between OPEC and Russia has been in force since May, so there has not been such a big decline in June contracts. Due to the steep fall in the price of crude oil in the international market, the price of oil in the Indian futures market has also continued to decline. Crude oil on the Multi Commodity Exchange, MCX, was trading at Rs 1658 per barrel, down Rs 114, or 6.43 per cent, from the previous session at 10.12 am on Tuesday.
The crude oil contract for the current month ended on 20 April on MCX which closed at Rs 965 per barrel, down by Rs 471, or 32.80 per cent, from the previous session on Monday. The most active contract for Brent crude, the benchmark crude oil on the international futures market Intercontinental Exchange, ie ICE, was trading at $ 25.38 a barrel, down 0.74 percent from the previous session. However, WTI’s June delivery contract on Naimex was trading at $ 21.46 a barrel, up 5.04 percent from the previous session.
This is the biggest reason for the decline
Gupta said that due to the havoc of Coronavirus, economic activity has collapsed all over the world due to which the demand for oil has come down drastically, hence there is pressure on its prices. Asked why the US and Canadian crude had sold below zero in the previous season, Gupta said rail, road and air traffic was affected worldwide as lockdown and movement restrictions were most effective in breaking the link between the coronavirus infection. It is seen as a measure, which is why the demand for oil has come down considerably.
He said that the main reason for the May contract deal going down to zero was that the traders who had taken the May deal were not willing to take delivery. Significantly, the largest exporter of oil, OPEC and its allies such as Russia, had already agreed to a record reduction in oil production. The US and other countries also decided to reduce oil production. But, despite the reduction in oil production, all economic activities came to a standstill due to spread of coronavirus, the world has more crude oil available than needed.
Difference between Brent and WTI
WTI and Brent are crude oils used as benchmarks in oil pricing. WTI is also known as sweet light and is extracted from oil fields of Texas, Louisiana, and North Dakota. Brent is less sweet and light than WTI and is extracted from North Sea