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Global oil markets remained under intense pressure on Tuesday, with Brent crude dropping below $20 per barrel for the first time in 18 years while other major benchmarks across the world tumbled. 

Brent, the international crude marker, slipped to $18.10, indicating that markets see no immediate let-up to the collapse in oil demand that sent some US oil benchmarks plunging under $0 for the first time on Monday, leaving producers paying for buyers to take their oil away while available storage is scarce.

Coronavirus has sent the oil sector into a state of crisis, with lockdowns implemented by authorities to smother the outbreak slashing demand for crude by as much as a third.

Contracts for the US benchmark West Texas Intermediate for delivery next month tumbled as low as minus $40 a barrel on Monday. Analysts at Citi warned that “if global storage worsens more quickly, Brent could chase WTI down to the bottom”.

The collapse in the May WTI contract was partly a technical product of the fact that it expires on Tuesday, meaning trading volumes were low and making the contract for June delivery more noteworthy, analysts said. That contract held above $20 a barrel on Monday but slid as much as 42 per cent on Tuesday to trade at lows of $11.79, suggesting the blowout in the May contract was more than a blip and that the entire global oil market faced challenges.

Goldman Sachs analysts said the June contact was likely to face downward pressure in the coming weeks, pointing to the “still unresolved market surplus”.

“As storage becomes saturated, price volatility will remain exceptionally high in coming weeks,” they said. “But with ultimately a finite amount of storage left to fill, production will soon need to fall sizeably to bring the market into balance, finally setting the stage for higher prices once demand gradually recovers.”

Warren Patterson, head of commodities strategy at ING, said it was likely that “storage this time next month will be even more of an issue, given the surplus environment”.

“And so in the absence of a meaningful demand recovery, negative prices could return for June,” he added.

European equities traded lower, partly dragged down by weaker energy stocks. The continent-wide Stoxx 600 was down 1.9 per cent, with its oil and gas sub-index dropping 3.3 per cent. In London the FTSE shed 1.7 per cent, while Frankfurt’s Dax slid 2.3 per cent. 

Equities were also broadly lower in Asia, with futures tipping US stocks to fall 1 per cent when trading in New York begins later.

On Wall Street overnight, the S&P 500 closed down 1.8 per cent, partly because of weakness in energy shares, but also due to increased pessimism over the time it will take for countries to emerge from lockdowns.

In fixed income, the yield on the 10-year US Treasury fell 0.03 percentage points to 0.585 per cent as investors retreated to the safety of the debt.

Bengaluru, Mar 30: The nationwide lockdown has left the state on the brink of a fresh agrarian crisis.

The lack of transport facilities spells doom for ready-to-harvest grapes worth Rs 500-600 crore in Bengaluru Rural, Chikkaballapur and Kolar districts. Unable to find buyers, several farmers have begun dumping their produce into compost pits.

On Sunday, Munishamappa, a farmer in Chikkaballapur, emptied four truckloads of grapes into the pit as buyers didn’t turn up due to the lockdown. “If the grapes wither and fall to the ground, it will affect the soil’s fertility and I will be forced to dispose of them,” he said.

Venkata Krishnappa, Munishamappa’s son, said their 1.5-acre vineyard yielded 25 tonnes of grapes. “Just before the lockdown, 10 tonnes were harvested and delivered to the market. Due to lack of transport, buyers haven’t turned up for the remaining 15 tonnes which we are dumping into the pit.”

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Anjaneya Reddy, a farmer leader, said that in Chikkaballapur alone, they have cultivated grapes on 2,000 acres. “Even if you consider 15 tonnes per acre as yield, there are about 30,000 tonnes ready to be harvested in the district. At a market rate of Rs 50 to Rs 60 per kilogram, the net worth will be Rs 200 crore to Rs 300 crore. And if you consider the crop in Kolar and Bengaluru Rural, grapes worth Rs 500 to Rs 600 crore are at stake,” he explained.

The ‘Dilkush’ grapes is the most preferred variety of domestic consumption, according to the farmers.

This apart, farmers would have invested about Rs 3 lakh to 4 lakh per acre on fertilisers, pesticide and labour. “With markets being shut and no of the transport facilities available, farmers are forced to dump their produce into pits. It is high time the government intervened and provided us with market options so that farmers can sell at an affordable price of Rs 30 to 40,” Reddy said.

Somu, a farmer in Ganjam village of Srirangapattana, dumped two tonnes of chikku (sapota) citing market shutdown in Mandya. Reddy appealed to the government to emulate the Maharashtra model where the government is helping farmers market fruits through Hopcoms or dairy units as nutrient supplements to people.