Oil prices tipped Monday sharply, with U.S. crude briefly falling below $20 and Brent hitting its lowest level in 18 years, on heightened worries that the global coronavirus shutdown could last months and demand for fuel might drop further.
Brent crude, the international phenomenon for oil, was down $2.09, i.e., 8.4%, at $22.84, after earlier falling to $22.58, the lowest since November 2002.
U.S. West Texas Intermediate (WTI) crude plunged $1.11, or 5.2%, to $20.40. Earlier within the session, WTI fell as little as $19.92.
The value of oil is now so low that it’s changing into unprofitable for a lot of oil companies to stay active, analysts stated, and better cost producers could have no choice; however, to shut manufacturing, especially since storage capacities are almost full.
Rystad Energy’s chief of oil markets, Bjornar Tonhaugen, stated: “The oil market supply chains are broken because of the unbelievably large losses in oil demand, forcing all available alternatives of supply network changes to happen during April and May,” along with reducing refineries runs and increasing storage.
Besides demand destruction, oil markets have been slammed by the Saudi Arabia-Russia price war that’s flooding markets with a supply glut.
An executive from Saudi Arabia’s energy ministry stated Friday the kingdom was not discussing with Russia to offset oil markets despite rising burden from Washington to stem the rout that has cut prices by over 60% this year.