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Crude Oil Slumps to New Multi-Year Low on Recession Fears

CommoditiesMar 18, 2020 08:47AM ET
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By Peter Nurse - Oil markets continued to head south Wednesday, with U.S. crude futures tumbling to a near 18-year low as travel and social lockdowns sparked by the coronavirus epidemic knocked the outlook for demand.

AT 9:00 AM ET (1300 GMT), U.S. crude futures traded 8.7% lower at $24.94 a barrel, its lowest since May 2002. The international benchmark Brent contract fell 5.2% to $27.23, its lowest since May 2003.

The battleground against the virus has moved from Asia to Europe and America. Deaths have continued to soar in Italy and Spain, prompting the European Union to ban travellers from outside the bloc for 30 days in an unprecedented move to seal its borders. Travel within Europe has also been severely limited by public health measures closing most non-essential business activity.

The Trump administration has recommended the closure of restaurants, bars and schools while assembling a $1.2 trillion stimulus plan that would shortly send cash to Americans, and backstop airlines and other companies. However, even those financial measures look unlikely to stop a near-term collapse in physical demand for fuel.

U.S. Gasoline RBOB Futures remained close to their all-time lows at 70.36c a gallon, down 1.1% on the day.

Some are looking to China, where this coronavirus started, for the best guide to the potential hit to demand. 

China’s economy will grow 3.4% this year, according to the median of 12 forecasts since Monday, compiled by Bloomberg. That is the lowest since a contraction in 1976 - the final year of the Cultural Revolution which wrecked the economy and society - and the year Mao Zedong died.

Data out Monday showed an across-the-board slump in manufacturing, retail sales and investment in January and February, with all the numbers hitting historic lows. 

Meanwhile, Saudi Arabia has ordered state-owned Aramco (SE:2222) to keep supply at a record of 12.3 million barrels per day over "the coming months", suggesting Riyadh is determined not to back down in the price war with Russia.

“The pickup in oil supply from April following the breakdown of OPEC+ talks does mean that these weak prices are likely to linger for quite a while longer,” said ING, in a research note.

“Lower prices are clearly going to hurt oil exporting countries, and the Iraqis have already requested that OPEC+ hold an urgent meeting. However, with the Saudis and Russians in a fierce battle for market share, it is difficult to see any quick resolution on this front,” ING added.

Analysts at Rystad Energy estimate that up to 3 million barrels a day extra could hit the global market in April, if Libya can agree a ceasefire in its civil war. Around 1 million b/d of Libyan capacity is currently shut in due to hostilities.


Crude Oil Slumps to New Multi-Year Low on Recession Fears

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Comments (2)
Andrew carson
Andrew carson Mar 18, 2020 10:54AM ET
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Once the Corona virus is in retreat things will start bouncing back. The soonerr the better of course.
Christopher Tingus
Christopher Tingus Mar 18, 2020 10:06AM ET
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China's economy as well as the West will experience an even slower growth than projected. Today, Hong Kong reported an uptick in the infected virus. Despite govt intervention globally, Middle East heat both Meterologically speaking and geopolitically with much higher unemployment numbers even here in the States never mind elsewhere will play havoc w just plain folks Main Street everywhere.......with company in Singapore engaged with 40+ years senior devl project devl pan continent, RWA with any blend, any petroleum related product, LPG, LNG, WTI, etc., watching loaded vlccs sitting in the waters off Singapore and China filled to the brim with oil hoping China will again buy...well, they supplied to early as I forecasted with experience and little emotion the reality of USD $18-21 as our target buy opportunity to store and wait 24 weeks!!China will again turn its wheels...the West as well, however despite these scoundrel Democrats from the Plantation Party here in the States, we sha
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