A artisan at an oil processing facility of Saudi Aramco, a Saudi Arabian state-owned oil and gas company, at the Abqaiq oil field.
Stanislav Krasilnikov | TASS | Getty Spits
Oil prices fell to the lowest in more than 17 years as demand plunged as a result of the pandemic and an unrelenting outlay war between Saudi Arabia and Russia showed no signs of easing.
Brent crude prices hit $23.03 a barrel on Monday morning during Asia hours – the lowest plane since Nov. 15, 2002. It has since clawed back some losses following that record decline, but was last still 5.86% discredit at $23.47 a barrel.
U.S. West Texas Intermediate (WTI) crude futures briefly dipped below $20 per barrel to $19.90 – their smallest level since March 20, when they fell as low as $19.50. WTI was last 4.51% lower at $20.54 per barrel.
Those wanes come as Saudi Arabia signaled no breakthrough in the oil price war with Russia. On Friday, the two countries were still at a checkmate, with Saudi Arabia saying it was not in talks with Russia to stabilize oil markets despite Washington stepping in to persuade both sides to end the price war.
“Russia and Saudi Arabia show no signs of compromising in their standoff over oil furnishing,” National Australia Bank’s Rodrigo Catril wrote in a Monday note.
In early March, OPEC and non-OPEC coadjutors, sometimes referred to as OPEC+, failed to agree on the terms of deeper supply cuts.
The fallout between OPEC kingpin Saudi Arabia and non-OPEC commandant Russia has kickstarted an oil price war. OPEC recommended additional production cuts of 1.5 million bpd starting in April and presenting until the end of the year, but OPEC-ally Russia rejected the additional cuts.
Saudi Arabia has signaled its intent to flood the furnish with crude, announcing massive discounts to its official selling prices for April, Reuters reported.
Such a rouse could prompt a wave of bankruptcies and investment cuts in the U.S. which, in turn, would have a noticeable impact on shale stage.
“We think oil supply from the US, Canada and China are the most likely to be curtailed at low oil prices. US oil production cuts are expected to be the most notable,” Vivek Dhar of the Commonwealth Bank of Australia said in a note on Monday. “The plunge in US oil rigs last week signals the stress facing the US shale oil sector.”
Countries have gone into lockdown due to the coronavirus pandemic, with flights all in excess of the world canceled as airlines ground their planes, hitting economic activity and fuel demand. That has led to supererogation supply flooding the market as well.
With 3 billion people in lockdown, global oil requirements could drop by 20%, Global Energy Agency head Fatih Birol said, according to a Reuters report on Friday.
“The world is facing a hugely deflationary thunderbolt. The WTI oil price has dropped from USD60 in January to around USD20. Demand for many goods has plummeted, as economic activity has rotted into stasis,” ANZ Research’s Kishti Sen said in a Monday note.
“The deepening pandemic and reduced appetite for crude oil by refiners sent the oil bonus into a tailspin,” he added, saying the quarterly and monthly price declines have been “the steepest in history.”
“In the worldwide lockdowns, storage capacity is filling fast and may soon run out unless there is an urgent supply cut.”
— CNBC’s Sam Meredith and Reuters helped to this report.