Crude oil benchmarks slumped at the open of electronic trading yesterday, extending last week’s losses as the global COVID-19 pandemic worsened and the Saudi Arabia-Russia price war heightens.
In early trading, Brent futures fell 7.1 per cent to $23.15 a barrel, while US crude futures lost 5.6 per cent, or $1.17, to $20.34 a barrel.
The oil markets are enduring a twin shock of demand destruction caused by the COVID-19 pandemic and the Saudi-Russia price war that is flooding markets with extra supply. The coronavirus pandemic has already killed about 32,000 people and sickened more than 500,000 worldwide.
The director of the National Institute of Allergy and Infectious Diseases, Dr. Anthony Fauci, yesterday estimated the United States alone could suffer as many as 200,000 deaths.
The virus has brought the worldwide aviation industry to a standstill and put roughly 3 billion people on lockdown to limit the spread of the virus.
Reuters reported that with many eschewing daily automotive use, analysts have estimated worldwide fuel demand could fall by as much as 20 per cent in the coming month.
Despite this, Saudi Arabia and Russia remain at loggerheads. Russian oil companies have said they expect the price war to continue, while the Saudis have not given any indication that there are new talks coming to curb supply. Still, any move Saudi Arabia and the Organisation of the Petroleum Exporting Countries (OPEC) makes may not be enough, Goldman Sachs said last week in a note.
They anticipated a fall of nearly 19 million bpd in global oil demand in April.
In recent days prices for crude oil traded at key locales such as Midland, Texas, have traded at several dollars less than US futures, an indication that companies there are anticipating a flood of supply.
U.S. oil production is currently running at roughly 13 million barrels per day, a record, but is expected to drop by more than 1.4 million bpd by the end of the third quarter 2021.