U.S. Oil Plunges to 18-Year Low as Lockdowns Trigger Market Meltdown

SEATTLE (Oil Monster): Oil prices plunged on Wednesday, with U.S. crude futures hitting an 18-year low, as governments worldwide accelerated lockdowns to counter the coronavirus pandemic.

Oil futures have lost more than half their value in the past 10 days as schools have closed, businesses have shuttered and governments worldwide have urged residents to limit gatherings. The decline in the U.S. market in the last 10 days is the largest ever for the contract since it was introduced in 1983.

“The market is cascading. It’s trying to search for a bottom and it doesn’t seem able to find one,” said Gene McGillian, vice president of research at Tradition Energy in Stamford, Connecticut. “There are fears of an economic collapse because of what this virus represents, globally.”

Global oil demand by the end of March could fall as much as 8 million to 9 million barrels per day (bpd), Goldman Sachs said.

Investors broadly fled risky assets again on Wednesday. U.S. stocks slumped, with the S&P 500 dropping 7%, while copper futures fell 6.9%. [MKTS/GLOB]

U.S. crude CLc1 fell $6.58, or 24.4%, to settle at $20.37 a barrel. U.S. crude futures have lost 56% over last 10 days.

Brent crude LCOc1 settled down $3.85, or 13.4%, at $24.88 a barrel after dropping as low as $24.52, its weakest since 2003.

The oil market was already reeling after Saudi Arabia decided this month to dramatically increase supply since it and Russia could not agree to cut output in anticipation of weaker demand.

Saudi Arabia has ignored entreaties to act to balance the market, reiterating plans to maintain production at more than 12 million barrels per day, which would be a record.

U.S. crude futures fell even after weekly U.S. data showed notable declines in gasoline and diesel inventories. Crude stocks rose by 2 million barrels, while gasoline and distillate inventories fell by 6.2 million and 2.9 million barrels, respectively. [EIA/S]

Goldman forecast a fall in Brent prices to as low as $20 in the second quarter. Rystad Energy projects a year-on-year decline in demand of 2.8 million bpd, or 2.8%, this year.

Courtesy: www.reuters.com