Oil prices plummet as pandemic dims demand outlook

MELBOURNE / TOKYO (Reuters) – Crude oil benchmarks fell sharply on Monday, Brent hitting its lowest level since November 2002, fears grew over the coronavirus pandemic, eroding demand and the price war between l ‘Saudi Arabia and Russia threatening to overload the market.

Brent futures LCOc1 fell 5.8%, or $ 1.45, to settle at $ 23.48 per barrel at 6:23 am GMT, after a previous drop to $ 23.03, the lowest since November 2002.

US West Texas Intermediate (WTI) CLc1 crude oil futures fell to $ 19.92, near an 18-year low earlier this month, and was trading lower for the last time. from 3.8%, or $ 0.82, to $ 20.69 per barrel.

“Central banks have eased (monetary policy) and governments have proposed stimulus packages, but these are only support measures, not radical treatment,” said Satoru Yoshida, commodity analyst at Rakuten Securities.

“Until we see signs of an end to the pandemic, oil prices will remain under pressure and could plunge below $ 20 a barrel,” he said. The next level of support for WTI crude could be around $ 17, said Yoshida, a level last seen in 2001.

Asian stocks also slid Monday despite massive efforts by central banks to support the markets with rate cuts and asset buying campaigns.

Oil markets have been destroyed by the destruction of demand caused by the coronavirus pandemic and the price war between Saudi Arabia and Russia, which is flooding the markets with additional supply.

Saudi energy ministry official said on Friday the kingdom was not in talks with Russia to balance oil markets despite growing pressure from Washington to stop the rout that cut prices by more than 60% this year.

With global demand now expected to drop 15 to 20 million barrels a day, down 20% from a year earlier, analysts estimate that massive production cuts will be needed beyond just the Organization of oil exporting countries (OPEC).

“OPEC, Saudi Arabia and Russia could fix their differences, but OPEC could not do much … The shock of COVID-19 demand is just too great,” said Lachlan Shaw, head of commodity research at the National Australia Bank.

The contango spread between May and November on Brent crude oil peaked at $ 13.45 a barrel, while the six-month spread for American crude widened to minus 12.85 $ per barrel, the largest discount since February 2009.

Prompt prices are lower than those for the next few months in a contango market, encouraging traders to store oil for future sales.

The coronavirus pandemic, which has killed an estimated 32,000 people and made sick more than 660,000 worldwide, has blocked the global aviation industry and put about 3 billion people in a deadlock.

“From a physical point of view, it’s really dark,” said Shaw. “You need a strong signal to tell suppliers that this is a pretty evil situation.”

(GRAPHIC-Largest Contango for Brent, WTI Crude Oil Futures in Link Years: here)

Report by Sonali Paul in Melbourne and Yuka Obayashi in Tokyo; Additional reports by David Gaffen in New York and Florence Tan in Singapore; Editing by Shri Navaratnam and Tom Hogue

Our standards:Principles of the Thomson Reuters Trust.

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