Why did oil prices hit an 18-year low despite market optimism?

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Oil Prices Plunge Amidst Oversupply and Weak Demand Despite Market Optimism

Global oil prices experienced a significant downturn, with West Texas Intermediate (WTI) crude reaching an 18-year low of US$18.03 per barrel. This sharp decline occurred despite a general surge in global equities driven by positive news regarding potential coronavirus drug trials and the phased reopening of economies. The primary factors contributing to this price collapse were a chronic crude oversupply and a considerable weakening of energy demand due to the ongoing pandemic.
Crude Oversupply and Wilting Demand

World oil prices have been under immense pressure throughout the week, largely due to persistent concerns about a substantial supply glut. This situation persists even with efforts to implement crude production cutbacks. Concurrently, energy demand continues to diminish significantly as the coronavirus pandemic impacts global economic activity and travel.
West Texas Intermediate Hits Multi-Year Low

The price of West Texas Intermediate (WTI) crude for May delivery specifically experienced a dramatic fall, reaching its lowest point since 2002. This contract alone saw a weekly decline of nearly 20 per cent. In comparison, Europe's Brent crude experienced a 10 per cent decrease in value since the beginning of the week.
Technical Factors and Contract Expiry

In addition to the fundamental issues of oversupply and weak demand, technical factors surrounding the upcoming expiry of the WTI May contract also contributed to the price volatility. The contract's sharp decline was partly influenced by these specific market mechanics as traders adjusted positions ahead of its expiry on the following Tuesday.

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Why did oil prices hit an 18-year low despite market optimism?

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