Crude Oil slumped to a 17-year low as coronavirus lock-downs cascaded through the worldslargest economies, leaving themarket overwhelmed by crateringdemand and a ballooning surplus of crude.
Futures in London fell as much as 7.6% to the lowest sinceNovember 2002, while New York crudebriefly dipped below $20 a barrel. Physical oilmarkets are struggling to store fuel, hit by a double whammy of virus restrictions erodingdemand and a damagingwar for market share between SaudiArabia and Russia that has prices on track for the worstquarter on record.
The kingdom said on Friday that it hadn’t had any contact with Moscow about output cuts or enlarging the OPEC+ alliance of producers. Russia also doubleddown, with Deputy Energy Minister Pavel Sorokin saying oil at $25 a barrel is unpleasant, but not a catastrophe for the nation’s producers.
“Demand concerns are critical but well known, what really took the market down were the signals we got from Saudi Arabia and Russia that theyintend to continue their current path,” said Vivek Dhar, a commodities analyst at Commonwealth Bank of Australia. “Market hopes of a deal have come undone.”
OPEC nations aren’t giving support to a request from the group’s president for emergency consultations over tanking prices, according to a delegate. Algeria, which holds the cartel’s rotating presidency, has urged the secretariat to convene a panel but the call has failed to gather the majority backing necessary to go ahead. Riyadh is among those opposing the idea.
The world normally uses 100 million barrels of oil day, but forecasters predict as much as a quarter of that has disappeared in just a few weeks. The plunge in consumption is without precedent since a steady flow of oil becameessential to the globaleconomy more than a century ago. The great crash of 1929, the twin oil shocks of the 1970s and the global financialcrisis don’t come close.
Brent crude for May declined $1.55, or 6.2%, to $23.38 a barrel on the ICE Futures Europe-exchange as of 11:36 a.m. Singapore time after falling to $23.03 earlier. The contract is also set for theworst month on record, down 54% in March, and 65% lower this quarter.
The six-month spread for Brent was at a contango of more than $13 a barrel after closing at the widest gap since late 2008 on Friday. The prompt timespread was also at more than a $3 contango.
West Texas Intermediate slid $1.07, or 5%, to $20.44 a barrel on the New York Mercantile Exchange after falling to $19.92 in early trading. The contract is down 54% this month and about 66% this quarter.