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Brent hits 18-year low, U.S. crude dips below $20/bbl

CommoditiesMar 30, 2020 03:50PM ET
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© Reuters. FILE PHOTO: The sun sets behind a crude oil pump jack on a drill pad in the Permian Basin in Loving County

By Scott DiSavino

NEW YORK (Reuters) - Global oil benchmark Brent crude plunged to its cheapest in 18 years on Monday, while U.S. crude briefly tumbled below $20 per barrel, on growing fears the global coronavirus shutdown could last months and demand for fuel could decline further.

With Saudi Arabia and Russia set to flood the market with oil next month, producers and shippers have been scrambling to lock oil up in storage as demand falls.

Meanwhile, the coronavirus pandemic is expected to cause at least a 20% drop in fuel demand worldwide as governments take steps to restrict the spread of the virus.

Brent futures fell $2.54, or 10%, to $22.39 a barrel by 1:21 p.m. EDT (1721 GMT), while U.S. West Texas Intermediate (WTI) crude fell $1.31, or 6.1%, to $20.18.

Earlier in the session, Brent fell as low as $21.65 per barrel, its lowest since March 2002, while WTI dropped to $19.85.

The price war between Saudi Arabia and Russia erupted earlier this month after the collapse of a three-year deal to limit supply between the Organization of the Petroleum Exporting Countries (OPEC) and other producers led by Moscow.

So far, efforts at negotiation between the two producers and the United States have not changed the outlook. Saudi Arabia said on Monday it plans to boost oil exports to 10.6 million barrels per day from May.

U.S. President Donald Trump and Russian President Vladimir Putin agreed during a phone call to have their top energy officials meet to discuss slumping global oil markets.

Major crude benchmarks have recorded losses for five straight weeks. The price of oil is now so low that it is becoming unprofitable for many oil firms to remain active, analysts said, and higher-cost producers will have no choice but to shut production, especially since storage capacities are almost full.

The market added to earlier losses after traders said Genscape reported that U.S. stockpiles at the key Cushing storage hub in Oklahoma rose more than 4 million barrels last week, which was the biggest-one week increase in more than 10 years.

Declining demand and expectation that storage will be swiftly filled has squeezed prices for major U.S. grades of crude oil, including crude traded out of Midland, Texas, the heart of U.S. shale production, which now trades at roughly $10.75 a barrel - a steep discount to WTI, and one that suggests heavy oversupply to come. [CRU/C]

Bank of America (NYSE:BAC) lowered its oil price forecasts for the second time in two weeks after the bank's economists projected global GDP would contract in the first half of 2020.

"On a quarterly basis, we expect to see the steepest decline in global oil consumption ever recorded," BofA analysts said, reflecting a 12 million barrel per day (bpd) drop in the second quarter of 2020 and a 4.5 million-bpd contraction for the year.

BofA reduced its 2020 price forecasts to $37 per barrel for Brent and $32 for WTI, and said it expects both benchmarks will trade in the teens in coming weeks.

Rystad Energy's head of oil markets, Bjornar Tonhaugen, said: "The oil market supply chains are broken due to the unbelievably large losses in oil demand, forcing all available alternatives of supply chain adjustments to take place during April and May."

These included cutting refinery runs and increasing onshore or offshore storage, he said.

Supertanker freight rates are rising for a second time this month as traders rush to secure ships for storage.

Goldman Sachs (NYSE:GS) analysts said demand from commuters and airlines, which account for about 16 million bpd of global consumption, may never return to previous levels.

"This game of attrition is likely to drag prices even lower and even a price of $10 per barrel is no longer unimaginable," said Hussein Sayed, analyst at FXTM.

Graphic: oil prices IMAGE https://fingfx.thomsonreuters.com/gfx/ce/dgkvlgxzpbx/Annotation%202020-03-30%20105330.jpg

Graphic: Estimated 2020 cash costs for oil fields https://fingfx.thomsonreuters.com/gfx/editorcharts/GLOBAL-OIL-OPEC-BUDGETS/0H001R8JXCJT/eikon.png

Brent hits 18-year low, U.S. crude dips below $20/bbl
 

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Comments (17)
Tuấn Nta
Tuấn Nta Mar 30, 2020 8:09PM ET
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Why WTI is nearly 11 usd/bbl, SO help me more understand. Thanks
Cash Fox
Cash Fox Mar 30, 2020 5:27PM ET
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Now buying call options strike 40 maturity  October and i am a rich man...
Soladotun Olatunji
Soladotun Olatunji Mar 30, 2020 5:27PM ET
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🤔
Muhammad Yaqoob
Muhammad Yaqoob Mar 30, 2020 4:06PM ET
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coming days are upside of crude oil
Muhammad Yaqoob
Muhammad Yaqoob Mar 30, 2020 4:04PM ET
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i think ressia and Arab both will on one page soon...
jemin An
jemin An Mar 30, 2020 8:17AM ET
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Crude oil WTI is going to under 20 dollar! I can hear shale oil companies screaming.
jemin An
jemin An Mar 30, 2020 5:53AM ET
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Yesterday in L.A. 17 years old poor boy corona patient passed away without any medical suffort, cause don't have medical insurances. It is CORONA CRISIS. RIP
Show previous replies (3)
rob park
rob park Mar 30, 2020 5:53AM ET
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Fred Diebold you have absolutely no clue
Junk Man
Junk_Man Mar 30, 2020 5:53AM ET
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Absolutely uninformed and ignorant.
Mike Roland
Mike Roland Mar 30, 2020 5:53AM ET
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your talking about trump right?
Chris Martin
Chris Martin Mar 30, 2020 5:53AM ET
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So, he was being sent to the hospital but tou take cnn talking points of socialism? Get a grip on reality...
Chris Martin
Chris Martin Mar 30, 2020 5:53AM ET
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Mike Roland we're talking about mike
Space Lord
Space Lord Mar 30, 2020 2:20AM ET
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Our darkest days
jemin An
jemin An Mar 30, 2020 1:33AM ET
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Are they buying stocks directly by stimulus money? Let me advise, twisted artificial market is no good for future. What is the aim, 26,000 DOW previous top? Did they have enough room for mortgage margin call? NO.
Adamo Nals
Adamo Nals Mar 29, 2020 11:18PM ET
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The problem is is there’s no demand. I still haven’t filled up gas tank from two weeks ago. But I can tell you the implications of on the markets that so many are ignoring oil collapsing. The algos will trigger below 20 or even right here, and drop the market 20% in one day. And that might be a couple days 10 to 20% down days. We are heading for a global depression. It’s sad but it’s reality
john richards
john richards Mar 29, 2020 11:16PM ET
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So we have oil that may cost more to store than it is worth, negative rates and every central bank dumping gas on it by the trillions.     Vs a completely theoretical academic model predicting doomsday. BOL with that.
Wayne Rollins
Wayne Rollins Mar 29, 2020 11:16PM ET
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i def only 1 remembering last time Russians went broke messing with Arabs. lol.
db cooper
db cooper Mar 29, 2020 10:41PM ET
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Something will give..........and this bleak doomsday scenario will change.  NO ONE is making any  money at these prices.
franklin neversoy
franklin neversoy Mar 29, 2020 10:16PM ET
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Russia excellent at gorilla war fare they not scared of anything
Chris Martin
Chris Martin Mar 29, 2020 10:16PM ET
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You appear to be complimenting murderous thieves?
jemin An
jemin An Mar 29, 2020 9:34PM ET
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Russia use relatively cheap weapon, oil price, leads US economy's massacre. It remind me Vietnam guerilla war.
john richards
john richards Mar 29, 2020 9:34PM ET
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Russia's entire economy is oil.  The ruble fared worse than every currency on earth.  It remind me of reading the grass is blue and the sky is green.
jemin An
jemin An Mar 29, 2020 9:34PM ET
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The cost of oil manufacturing for Russia 17 dollar, and they were prepared so long this price war. But shale companies average cost of manufacturing are around 36 dollar per barrel. So, price war longer, Russia has to cut their profits, but shale in US nothing to react, but to stop business.
Chris Martin
Chris Martin Mar 29, 2020 9:34PM ET
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I wonder how tou equate it to the Vietnam war? Did you read that somewhere or did it come out of YOUR imagination?
franklin neversoy
franklin neversoy Mar 29, 2020 8:34PM ET
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Oilmis last thing on peoples mind
franklin neversoy
franklin neversoy Mar 29, 2020 8:33PM ET
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Who cares about oil it’s dead till people drive again
dim dim
dim dim Mar 29, 2020 7:49PM ET
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US shale oil ... finally. !! with these prices the US will pay mining to lose ... ?? is like the US debt that has exceeded 26 trillion,but they continue to print dollars, all that beyond reason, to my friends only one advice,  now get rid of all the dollars you have, are you at Risk stay with useless photocopies in hand.!!
Trend Follower
Trend Follower Mar 29, 2020 7:49PM ET
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and get what instead?  Crazy advice
 
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