Yemisi Izuora
Oil prices fell on Monday as governments escalated lockdowns to curb the spread of the global Coronavirus outbreak that has slashed the demand outlook for oil and threatened a global economic contraction.
Brent crude futures fell $1.09, or 4 per cent, to $25.89 a barrel while West Texas Intermediate, WTI, crude futures was down 15 cents, or 0.7 per cent, at $22.48 a barrel.
Oil prices have fallen for four straight weeks and have given up about 60 per cent since the start of the year. Prices of everything from coal to copper have also been hit by the crisis, while markets in bonds and stocks enter rarely charted territory.
The coronavirus, which has infected more than 325,000 and killed over 14,000 worldwide, has disrupted business, travel and daily life. Many oil companies have rushed to cut spending and some producers have already begun putting employees on furlough.
The market has had to contend with the twin shocks of the demand destruction caused by the coronavirus pandemic and the unexpected oil price war that erupted between producers Russia and Saudi Arabia earlier this month.
The current production cut deal expires March 31.
“We believe oil prices will continue to fall into the teens in the short term amid disaster demand destruction, building global stocks and no production limits after April 1,” said Joseph McMonigle, senior energy policy analyst at Hedgeye Potomac Research, in a note.
Almost a third of Americans are now under orders to stay at home as states took extra measures to stem the rising numbers of cases in the world’s biggest economy, while in New Zealand Prime Minister Jacinda Adern said all non-essential services and business are to be shut down.
Demand is expected to fall by more than 10 million barrels per day (bpd), or about 10 per cent of daily global crude consumption, said Giovanni Serio, head of research at Vitol, the world’s biggest oil trader.
Goldman Sachs estimated demand loss could total 8 million bpd, brought about by countries slowing economic activity to combat the coronavirus outbreak.
Oil refiners worldwide are slashing production or considering cuts as the pandemic causes the evaporation of fuel demand.