‘Scary’ situation for Singapore traders as WTI crude oil prices crash

Those in the island nation, one of the world’s top commodity trading hubs, say the drop is a clear indication of a global supply glut

While some see opportunities, the cost of trade financing and storage remain major issues as Covid-19 has slowed international travel to a crawl

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The US benchmark crude oil price sank to its lowest level ever on April 20 amid an epic supply glut and the Covid-19 pandemic's hit to demand. Photo: AFP

Published: 4:44pm, 21 Apr 2020Updated: 10:11pm, 21 Apr 2020

As US crude oil futures this week plummeted into negative territory for the first time in history, oil traders based in Singapore breathed a sigh of relief that they use Brent crude oil prices and not West Texas Intermediate (WTI), the American benchmark.

WTI prices for May delivery plunged 321 per cent overnight to touch an all-time low of minus US$40.32 per barrel on Monday, settling for the day at minus US$37.63 as desperate traders paid to get rid of oil before the contracts expired on Tuesday. May prices recovered to US$1.63 per day when trading opened on Tuesday before dipping into negative territory again around 4pm Hong Kong time, while futures contracts for June were trading at roughly US$20.

Singapore’s geographical position has helped it become one of the world’s top commodity trading hubs, alongside Geneva, London and Houston. According to government agency International Enterprise Singapore, 60 per cent to 80 per cent of the world’s top oil and gas, steel and metals, mining and agricultural commodities companies have a presence there.

While traders in the island nation say they have been minimally affected by the shocking dip in prices, they point out that the drop is a clear indication of a global supply glut – and corresponding lack of storage space.

A veteran oil trader who declined to be named said the situation was “scary”. “It is a big deal in the US market, and the world market is probably shivering now because it can happen to the rest of the world,” he said. “If the world’s [storage facilities] are also all full and producers refuse to cut [down on production], then what next?”