OOO – Backwardation, page-5

West Texas Intermediate (WTI) oil dropped to the lowest level in nearly two decades on Monday as demand concerns continued to weigh over the black gold. 

The US benchmark fell to $16.81 per barrel, a level last seen in 1999, taking the cumulative moth-to-date losses to 16.24%, having declined by 56 percent in March. 

OPEC+, a group of major oil producers led by Saudi Arabia and Russia, recently promised to remove 9.7 million barrels per day from the market starting from May. The deal, however, failed to impress markets battling unprecedented demand destruction brought on by the coronavirus outbreak. 

The black gold witnessed a minor bounce from $19.29 to $29 in the first week of April, before beginning a fresh leg lower following the OPEC+ deal. Notably, prices fell by 20% last week with the US weekly inventory report underscoring demand destruction. Energy ministers from Saudi Arabia and Russia tried to put a floor under prices on Friday by stating readiness to enact more cuts but failed. 

Some observers are of the opinion that oil market rebalancing would happen once oil prices drop below $10.