Another rough session for oil.
Global oil benchmark Brent crude plunged to its cheapest in 18 years on Monday, while US crude briefly tumbled below $US20 per barrel, on growing fears the global coronavirus shutdown could last months and further drop demand for energy.
With Saudi Arabia and Russia set to flood the market with oil next month, producers and shippers have been scrambling to lock oil up in storage as demand falls.
The so-called OPEC + production cap is due to expire today, March 31, leaving the group and others, such as Russia free to produce as much oil as possible, which at least the Saudis, Russia, UAE, and several small producers plan to do.
On top of this, the coronavirus pandemic is expected to cause at least a 20% drop in fuel demand worldwide as governments take steps to restrict the spread of the virus.
Demand for jet fuel has been falling daily as airlines ground fleets and sack staff to cut costs. Petrol demand is also weakening.
May West Texas Intermediate oil fell $US1.42, or 6.6%, to settle $US20.09 a barrel in New York. That was the lowest front-month contract finish since February 2002.
Brent futures fell $2.54, or 10%, to settle at $22.39 a barrel.
Earlier in the session, Brent fell as low as $21.65 per barrel, its lowest since March 2002, while WTI dropped to $US19.27.
The price war between Saudi Arabia and Russia erupted earlier this month after the collapse of a three-year deal to limit supply between the Organisation of the Petroleum Exporting Countries (OPEC) and other producers led by Moscow.
Traders ignored news that President Donald Trump and Russian President Vladimir Putin agreed during a phone call on Monday to have their top energy officials meet to discuss slumping global oil markets, the Kremlin said.
Trump called Russia’s price war with Saudi Arabia “crazy” on the call, according to the Russian version of the discussion.
“Opinions on the current state of global oil markets were exchanged. It was agreed there would be Russo-American consultations about this through the ministers of energy,” the Kremlin said in a readout of the call, Reuters reported.
The Kremlin did not say what exactly the ministers would discuss, but Moscow has previously indicated it would like to see more countries joining efforts to balance global oil markets. The White House did not immediately respond to a request for comment.
America can’t and won’t limit crude production, although the slump in prices seems to be doing that with the number of oil rigs actively looking for oil in the US falling by 59 in the past two weeks.
