Oil prices tumble to 18-year lows
By Abigail Townsend
Date: Monday 30 Mar 2020
(Sharecast News) - Oil prices have hit fresh lows as the bitter price war between Saudi Arabia and Russia and the growing impact of coronavirus on the US and global economies weigh heavily.
At one stage, West Texas Intermediate dipped below $20 a barrel, a 17-year low. By 0930 BST, it had recovered slightly but was still trading down nearly 6% at $20.30. Brent crude was off 8% at $22.89, its lowest point since 2002.
Prices have come under pressure ever since Opec fell out with Russia, a key ally, over production curbs earlier this year. In response, Saudi Arabia, the de-facto head of the oil cartel, has promised to flood the market with oil, dragging prices lower.
Both countries are coming under intense international pressure to end the impasse but at the weekend, Saudi Arabia said it was not in talks with Russia.
Price pressures then increased further after US president Donald Trump extended social distancing rules and a senior government official warned that as many as 200,000 Americans could die from coronavirus.
The pandemic is causing demand for oil to slump worldwide, as economies grind to a halt. Shops and leisure venues have been shut, airlines have been grounded and borders closed.
Craig Erlam, senior market analyst at Oanda, said: "Oil prices have had another woeful start to the week.
"These really are extraordinary times. Saudi Arabia and Russia appear no closer to ending the price, which has hugely exacerbated the supply-demand problem in these already troubling times.
"The victims of the war will likely to be elsewhere though, with US shale expected to come under considerable pressure. The US is still pumping near record amounts of crude, the latest oil rig data suggest that may not last much longer. It's been on a downward trend for a while now, but last week's plunge was quite significant."
Michael Hewson, chief market analyst at CMC Markets, said: "Pictures of grounded aircraft fleets sitting parked on runways across the US point to a global economy that has ground to a virtual standstill, with US crude at one point dropping below $20. In some cases, producers in the US are paying to have oil taken off their hands - they can't give it away. In an age of negative interest rates, we're closer than ever to getting negative oil prices.
"Even if the Russians and Saudis were able to come to some agreement to cut production, the current surplus in supply, and lack of demand, is unlikely to prompt much of an uplift in prices.
"One silver lining for the Saudis will be the pressure this collapse in prices is having on US shale producers, some of which will probably go bust."
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