Oil Plummets to 17-Year Low as Virus Threatens Demand Slump

Daniel Fowler
March 30, 2020

Oil slumped to a 17-year low as coronavirus lockdowns cascaded through the world's largest economies, leaving the market overwhelmed by cratering demand and a ballooning surplus of crude.

Futures in London fell as much as 7.6% to their lowest since November 2002, after losing 5.4% on Friday to post a fifth straight week of declines. 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 Russian Federation that has prices on track for the worst quarter on record.

Even as the demand of oil continues to fall, Saudi Arabia is planning to increase its fossil fuel production, due to which the world may soon run out of space to store its extra oil, reports The Guardian.

"In recent days there has been a lot of chatter that demand for oil is going to be hit severely in the months ahead, hence by dealers are dumping the energy", said David Madden, market analyst at CMC Markets.

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OPEC nations aren't giving support to a request from the group's president for emergency consultations over tanking prices, according to a delegate. Riyadh is among those opposing the idea. USA oil production is now running at roughly 13 million barrels per day, a record, but is expected to drop by more than 1.4 million bpd by the end of the third quarter 2021.

As most of the European countries and the US are under lockdown, global oil consumption has remained weak, creating downward pressure on crude prices. The great crash of 1929, the twin oil shocks of the 1970s and the global financial crisis don't come close.

USA benchmark West Texas Intermediate fell 3.9 percent to trade at $20 a barrel, while global benchmark Brent crude was off 4.9 percent at $23 a barrel.

Crude futures shed about 45 percent of their value this month amid the global economic slowdown associated with COVID-19, and Saudi Arabia's decision to ramp up production to up to 12.3 million barrels per day. Most global majors have announced plans to cut back on capital expenditures and hundreds have already been laid off in anticipation of oil prices falling through the $20-per-barrel mark.

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