Worldwide oil prices drop to the lowest level in over seventeen years as demand plunged due to the coronavirus outbreak, and a cruel price war between Saudi Arabia and Russia reflected no signs of easing. On Monday morning, the prices of Brent crude hit$23.03 per barrel during Asia hours – the lowest since 15th November 2002. Since then, it faced some losses following that record decay, but last still 5.86% lower at $23.47 per barrel.
The United States West Texas Intermediate (WTI) crude futures temporarily dropped below $20 a barrel to $19.90 – their lowest level since 20th March, when they plunge as low as $19.50. Lastly, WTI was lower at $20.54 a barrel. Those drops happen as Saudi Arabia gestured no innovation in the war of oil price with Russia. On Friday, the two sides were still at a deadlock. Saudi Arabia is giving the expression of not having the talks with Russian to calm the oil markets, whereas Washington was putting pressure on both countries to end the price war.
Rodrigo Catril of the National Australia Bank wrote in a note on Monday that Saudi Arabia and Russia show not any signs of negotiating in their deadlock over oil supply in the market. In the early days of March, OPEC, as well as non-OPEC partners sometimes stated as OPEC+, failed to settle on the terms of extreme supply cuts. Saudi Arabia gestured its intention to flood the oil market with its crude, announcing huge discounts to its April selling prices, according to Reuters. These types of moves could initiate a wave of economic failure and also investment cuts in the United States, which in return would have an obvious impact on shale oil production.
Relationship between Worldwide lock-down and Oil Prices
Vivek Dhar of the Australian Commonwealth Bank said in a Monday note that they think crude oil supply from the United States, China, and Canada most likely cut at low oil prices. The cuts in the oil production of the United States likely to be the most important. The fall in the U.S. oil rigs previous week indicates the pressure facing the United States shale oil sector.
Countries across the world, gone into lockdown because of the COVID-19 outbreak due to which worldwide flights canceled as carriers ground their planes, resulting in hitting the economic activities and fuel demand. Consequently, it led to excess oil supply flooding the market all over the world. Fatih Birol, the head of International Energy Agency, said, with over three billion people in lockdown, world oil requirements may plunge by twenty percent.
Oil prices fall to 17-year low as Saudi Arabia-Russia standoff continues, coronavirus hits demand https://t.co/LFjfHAPkoA
— CNBC (@CNBC) March 30, 2020
ANZ Research’s Kishti Sen says in a note on Monday that the world is facing an enormously deflationary shock amid coronavirus epidemic. The WTI oil prices plunged from USD sixty in January to around USD twenty. Similarly, demand for several goods fell, as economic activity went into stability. He added, the extending epidemic and reduced craving for crude oil by refiners sent the price into a nosedive. The quarterly and monthly declines in the oil prices are the sharpest in history. Because of the lockdowns all over the world, the storage capacity is filling rapidly, and possibly sooner will run out except there is an instant supply cut.