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Oil falls to $26 a barrel due to weak demand

Brent for July fell 46 cents, or 1.7 per cent, to $26.02 this morning

Oil fell to around $26 a barrel as weak demand and excess supply pressured the mark, despite major producers beginning output cuts.

The global oil benchmark, Brent crude, has collapsed 60 per cent in 2020 and reached a 21-year low last month.

Brent for July fell 46 cents, or 1.7 per cent, to $26.02 this morning. US crude for June slipped 2 cents to $18.82. Both benchmarks rallied sharply on Thursday. Brent rose 12 per cent and US crude gained 25 per cent.

Output cuts of 9.7 million barrels per day by the Organisation of Petroleum Exporting Countries, Russia and other producers began on Friday.

Reflecting the output cuts agreed between OPEC and other major producers like Russia, the imbalance between oil supply and demand is set to be halved to 13.6 million barrels oil per day (bpd) in May, and drop further to 6.1 million bpd in June, according to Rystad Energy.

The US Energy Information Administration also said that crude inventories rose by 9 million barrels last week, less than the 10.6 million barrel rise analysts had forecast.

Oil prices are likely to fall further this year, even as countries begin to ease restrictions imposed to combat the virus outbreak and the output cuts by big producers set in, this may not fix the supply glut.

The estimated shortfall this year is expected to be about 30 million bpd of demand.

FURTHER READING: US oil prices fall back below zero

FURTHER READING: Oil prices fall amid continued storage capacity concerns

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