US oil price plunges to lowest level in 22 years as COVID-19 bites harder

US oil prices plummeted to their lowest points in 22 years on Monday as crude storage facilities filled up swiftly in the face of falling demand triggered by the coronavirus pandemic.

The May contract of US West Texas Intermediate (WTI) futures dropped 42% to $10.52 a barrel.

The May contract expires on Tuesday, making it vulnerable to lower trading volumes and more extreme market moves. The June contract of the WTI, which is more actively traded, depreciated by over 9% to $22.70 per barrel.

Brent crude, against which Nigeria’s oil grades are benchmarked, was $26.53 on Monday, about 5.5% below its price at the last session.

The development followed concerns that the volume of oil currently held in the US storage is dramatically increasing, with the coronavirus crisis worsening the challenge by significantly reducing consumption.

READ ALSO: Nigeria, others need $114bn to combat coronavirus —IMF

“The current forward crude oil curves for Brent and WTI are now in very deep contango, but the contango is also very front-loaded,” Bjarne Schieldrop, chief commodities analyst at SEB told CNBC.

A contango market means oil traders are optimistic that oil prices will rebound in the future, which encourages them to store oil now and sell later.

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