Oil prices have fallen to a 17-year low as coronavirus lockdowns impact the world’s largest economies and demand craters due to a growing surplus of crude.
Futures in London fell as much as 7.6% to the lowest level since November 2002, while New York crude briefly dipped below $20 U.S. a barrel. Physical oil markets are struggling to store fuel, hit by a double whammy of virus restrictions eroding demand and a damaging war for market share between Saudi Arabia and Russia that has prices on track for the worst quarter in history.
Saudi Arabia said that it hadn’t had any contact with Moscow about output cuts or enlarging the Organization of the Petroleum Exporting Countries alliance of producers. Russian Deputy Energy Minister Pavel Sorokin said Sunday that oil at $25 a barrel is unpleasant, but not a catastrophe for the nation’s producers.
The world normally uses 100 million barrels of oil day, but forecasters predict as much as a quarter of that has disappeared in just a few weeks. Brent crude oil for May declined $1.45 U.S., or 5.8%, to $23.48 U.S. a barrel on the ICE Futures Europe exchange after falling to $23.03 U.S. earlier. The contract is also set for the worst month on record, down about 54% in March, and 64% lower in the first quarter.
West Texas Intermediate slid 82 cents, or 3.8%, to $20.69 U.S. a barrel on the New York Mercantile Exchange after falling to $19.92 U.S. in early trading. The contract is down 54% this month and about 66% this quarter.
The plunge in consumption is without precedent since a steady flow of oil became essential to the global economy 100 years ago. The great crash of 1929, and the twin oil shocks of the 1970s and the global financial crisis of 2008 are not as bad as the current situation.
