Oil tanks ahead of OPEC's emergency meeting

OPEC may not be able to stem the oil price carnage

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Oil prices plunged Tuesday because of growing concerns about the supply and demand imbalances rocked by the fallout from the coronavirus.

TickerSecurityLastChangeChange %
USOUNITED STATES OIL FUND L.P.28.35-0.15-0.53%

West Texas Intermediate crude oil, the U.S. benchmark, fell 9.39 percent to $23.63 a barrel. Brent crude, the international benchmark, lost 3.57 percent to $31.87. Both energy components had gained more than 3 percent early in the session on the hopes that Russia and Saudi Arabia would reach an agreement on production at the upcoming virtual meeting.

“Oil dipped for 2 reasons,” Phil Flynn, senior market analyst at the Price Futures Group, told FOX Business. “The EIA lowered oil demand and production forecast and fears that the API report tonight is going to show massive crude oil and product builds. Some are predicting that crude supply could increase by a whopping 15 million barrels" said Flynn who is also a FOX Business contributor.

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The Energy Information Administration said Tuesday it expects global demand to fall by 5.2 million barrels per day in 2020 as inventories swell by 3.9 million barrels per day on average. The EIA officials reported that Brent could average $33 this year, which is $10 below last month’s forecast, and EIA officials think the United States could become a net importer of crude oil in the third quarter of this year.

Inventory data released Tuesday afternoon by the American Petroleum Institute is expected to show a build of 9.3 million barrels in the week ended April 3, according to a survey of 11 traders and analysts by The Wall Street Journal.

Tuesday’s selling marked a second straight day of losses for oil after WTI last week posted its biggest weekly advance on record because of hopes that Russia and Saudi Arabia would iron out their differences at a meeting likely to take place on Thursday.

Flynn thinks that “pressure from outside and within OPEC will lead to one of the biggest production cuts in history.

He said it’s an encouraging sign that U.S. Energy Secretary Dan Brouillette is joining the G20’s conference call scheduled for Friday.

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WTI crude oil has plunged 63 percent from its Jan. 6 peak because of the price war between Russia and Saudi Arabia that has made a supply glut worse at the time same the COVID-19 pandemic has zapped demand.