US: Oil tankers idle off California as demand drops

Oil gained ground in financial markets Wednesday, pulling further away from zero after getting turned upside down earlier this week amid a collapse in demand.

U.S. benchmark crude was trading as low as $6.50 a barrel Tuesday, more than 80% lower than the start of the year. The dizzying drop reflected stark suffering in the global economy that has left vastly diminished demand for oil.

There’s little mystery around the sharp drop-off: Efforts to limit the spread of the coronavirus have major cities around the world on lockdown, air travel has been seriously curtailed and millions of people are working from home, leading to far fewer commuters on the roads.

Oil tankers could be seen anchored off the Southern California coast Wednesday as the drop in demand has slowed the oil supply chain.

But pumps are still running, extracting oil from the ground, and all that oil has to go somewhere. Some brokers were betting that storage would be more valuable than oil next month, leading some on Monday to pay potential buyers to take oil off their hands.

Many analysts saw Monday's prices as limited to the peculiar nature of some contracts, but Tuesday's drop signaled the industry is in for a prolonged, widespread challenge.

The coronavirus outbreak has infected over 2.5 million people and killed about 180,000 around the world, including more than 45,000 in the U.S., according to a tally compiled by Johns Hopkins University from official government figures, though the true numbers are believed to be far higher.

Symptoms of COVID-19 can include fever, cough and trouble breathing. Most develop only mild symptoms. But some people, usually those with other medical complications, develop more severe symptoms, including pneumonia, which can be fatal.