Oil price dips to $12 US a barrel as oversupply problem persists

CBC News
Global Oil CBC News | James Alexander Michie

Economic slowdowns caused by the COVID-19 pandemic have caused demand for oil to plummet, and the price is moving along with it. (Richard Carson/Reuters)

World’s biggest oil-backed exchange-traded fund says it will dump its June holdings

The price of oil slumped again on Monday as the imbalance between too much supply and not enough demand continues to grow.

The North American oil benchmark, known as West Texas Intermediate, lost more than a third of its value, falling to $12.57 US a barrel.

That’s the going rate for a barrel of oil to be delivered in June, which is currently the most commonly traded contract on the futures market that serves as a proxy for the value of actual oil.

That market was plunged into chaos last week as the futures price for May oil dipped below zero at one point. While that was dismissed as a glitch caused mainly by the expiry of the May contract, the June oil contract is moving steadily lower as the market is finding it harder and harder to justify prices for oil at a time when there is far more being produced than can be used or stored at the moment.

May’s temporary price crash was caused by traders scrambling to offload contracts for oil before the deadline to actually receive it came, because data suggests storage tanks are filling up fast.

Data from the U.S. Energy Information Administration suggests there were 518 million barrels of oil in storage in the U.S. last week, close to the all-time high of 535 million reached in 2017.

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Source: Pete Evans | CBC News

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