Oil price fell below $20 a barrel yesterday, after the International Energy Agency (IEA) said demand would slump by a record this year despite a historic production cut deal.
Futures fell as much as 4.5% in New York to the lowest since 2002.
Oil demand will drop by over 9 million barrels a day this year, wiping out a decade of consumption growth, the IEA said, exhausting storage by mid-year.
While Saudi Arabia and other Gulf producers have pledged to cut supply starting next month, they have continued to flood the market in April.
Stockpiles are rising everywhere and weakening key physical market gauges. New York oil futures moved deeper into contango, signaling an expanding glut, while swap prices indicate North Sea cargoes are trading at bumper discounts.
Oil has lost about two-thirds of its value this year as countries extend their coronavirus lockdowns, death tolls mount around the world and unemployment explodes in America.
The International Monetary Fund (IMF) estimated the global economy will shrink 3% this year, a signal that energy demand may remain weak, while the IEA is warning that the worst may be yet to come.
“We may see further downward pressure on prices in coming days and weeks,” IEA Executive Director, Fatih Birol, said.
The IEA said consumption in April will fall by almost a third to the lowest level since 1995, and make this year the worst in the history of the oil market.
Despite OPEC+’s efforts to balance supply, global inventories will accumulate by 12 million barrels a day in the first half of the year and “overwhelm the logistics of the oil industry” in the coming weeks, it warned.
The massive OPEC+ deal to cut production starts next month. Until then the battle for market share persists with Abu Dhabi cutting its crude pricing for Asia. It follows a similar move by Saudi Arabia earlier in the week.

Group Managing Director of Nigerian National Petroleum Cooperation (NNPC), Mr Mele Kyari, says the Federal Government has made payment of over N200 billion to the power sector towards improving electricity supply in the country.
Kyari disclosed this while speaking with newsmen in Abuja, yesterday, shortly after a closed door meeting between the NNPC team, Minister of Power, Mr Sale Mamman and Managing Director of Transmission Company of Nigeria (TCN), Mr Usman Mohammed.
“Actually the Federal Government has made payment of over N200 billion for power in the last 23 days and this will go a long way to ensure that issues around power supply are addressed.
“We will work as a team to ensure that all issues are settled”, he said.
Kyari said that the team was in the Ministry of Power to inform the minister that in the last one or two months and particularly during the COVID-19 period, NNPC has increased gas supply to the power sector.
According to him, there will be significant improvement in power generation in all Federal Government and associated power facilities.
“This also means that Nigerians will get better access to power during this lockdown period and going forward.
“There are issues around power supply process and we have discussed most of them and we are moving as a team to make sure that we resolve issues around payment and evacuation.
“We are very confident that this will get the desired result. We will visit some power plants tomorrow to make sure that we sort out any issue to ensure that Nigerians have access to better power,” he said.
He said that the minister was very clear on what was to be done to improve power supply.
“We will make sure this becomes transparent and obvious to all Nigerians,” he said.
On his part, TCN Managing Director, Mr Usman Mohammed said that the meeting was to ensure that there was constant supply of power as directed by President Muhammadu Buhari.
Mohammed said that the President has directed that there should be constant power supply to the people during the COVID-19 lockdown.
“This is why this meeting was conveyed by the Minister of Power to discuss supply of gas to the power plants.
“This is very important, before now, we have been discussing with NNPC, of course there is gas availability in the market but there are several power plants that don’t have gas and that is a big problem for us.
“With this meeting where the minister prevailed that NNPC should assist in suppling gas to the power plants, we believe that will have steady and sustainable power supply going forward especially during the COVID-19 lockdown, “ he said.

Electricity Generation Companies (GenCos) comprising gas-fired and hydro stations said they could not generate 3,666 megawatts of electricity on Monday due to unavailability of gas.
This information was made known  in a daily energy report by the Advisory Power Team, office of the Vice President, a copy of which was obtained by The Tide in Abuja on Tuesday  .
Similarly, it said that 526.2 megawatts was not generated due to high frequency resulting from unavailability of distribution infrastructure.
The report, however, said that the GenCos released an average of 4,515 MegaWatts/Hour of electricity into the national grid on Monday.
It said that the electricity sent out by the GenCos was up by 148.05 megawatts from the 4,367 released on Sunday .
The report indicated that the power sector lost an estimated N2,012 billion on Monday  due to insufficient gas supply, distribution and transmission infrastructure.
On sector reform/activities, it said that the dominant constraint for Monday was unavailability of gas.
The report said that the peak generation attained on Monday  was 4,972.5  megawatts.