A barrel of Brent crude could soon cost less than a Café Latte unless exporters agree to make further deep cuts in output to help offset the devastating impact of the coronavirus experts have warned.
Rystad Energy said the massive drop in demand caused by the coronavirus could mean supplies run so far ahead of what is needed that prices fall to unprecedented levels.
North Sea at 'breaking point' as oil price turns negative in US
“Don’t be surprised if a barrel of oil gets cheaper than a latte in a while,” said the consultancy’s Bjornar Tonhaugen.
With Lattes selling for around £2.50 the comments will spark concern in the North Sea.
Industry leaders have said the slump in the crude price this year has left the North Sea at breaking point.
The Brent crude price fell below the key $20 (£16.20) per barrel level on Tuesday. This was the first time it had fallen so low in 18 years.Brent fetched $70/bbl in January.
On Monday the price for West Texas Intermediate crude fell into negative territory for the first time ever, meaning traders had to pay people to take oil off their hands.
Momentous Opec Plus production deal may not lighten gloom in North Sea
The problems caused by the fall in demand this year have been exacerbated in the US by a relative shortage of storage capacity for the oil produced from shale fields onshore.
Brent can be shipped more easily.
However, Mr Tonhaugen said the capacity to store Brent could be exhausted unless the supply demand imbalance is addressed.
This might require major exporters such as Saudi Arabia to agree to further significant output reductions, after committing to a historic programme of cuts earlier this month.
West of Shetland oil pioneer highlights 'drastic reduction' in investor interest in sector
Millions of barrels worth of daily production might need to be shut in.
Mr Tonhuagen said demand would likely only increase sufficiently if countries around the world eased coronavirus-related restrictions sooner than expected.
Brent crude sold for $20.25/bbl yesterday afternoon, up $0.92/bbl on the day.
News from trusted and credible sources is essential at all times, but especially now as the coronavirus pandemic impacts on all aspects of our lives. To make sure you stay informed during this difficult time our coverage of the crisis is free.
However, producing The Herald's unrivalled analysis, insight and opinion on a daily basis still costs money and, as our traditional revenue streams collapse, we need your support to sustain our quality journalism.
To help us get through this, we’re asking readers to take a digital subscription to The Herald. You can sign up now for just £2 for two months.
If you choose to sign up, we’ll offer a faster loading, advert-light experience – and deliver a digital version of the print product to your device every day. Click here to help The Herald: https://www.heraldscotland.com/subscribe/ Thank you, and stay safe.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereLast Updated:
Report this comment Cancel