At $24, Crude Oil Price Slumps to 17-year Low

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Ejiofor Alike with agency reports

Crude oil prices plunged wednesday, with US crude futures hitting an 18-year low and Brent a 17-year low as Goldman Sachs said lockdowns to counter the COVID-19 pandemic raised prospect of the steepest ever annual fall in oil demand.

At the early trading wednesday, the West Texas Intermediate (WTI) for April delivery fell $1.75 or 6.1 per cent, to settle at $26.95 a barrel on the New York Mercantile Exchange.

The global benchmark, Brent crude had initially lost $1.32 to end the session at $28.73 a barrel on the ICE Futures Europe exchange.

Bloomberg reported that the WTI futures in New York later fell 24 per cent to settle at $20.37 a barrel, the lowest since February 2002.

It had fallen almost 25 per cent on March 9.

Brent futures also declined 13 per cent to settle at $24.88 a barrel, the lowest since 2003.

With this sump, oil is now cheaper than any time during the global financial crisis, when the world economy largely came to a halt for a few days.

Demand is in free fall, with some traders saying it could drop by more than 10 per cent compared with last year.

With countries worldwide urging residents to limit gatherings and isolate themselves, global oil demand by the end of March could fall as much as 8 to 9 million barrels per day, Goldman Sachs said.

The yearly fall could be as much as 1.1 million barrels per day, which it said would be a record.

“The oil demand collapse from the spreading coronavirus looks increasingly sharp,” Goldman Sachs said, forecasting a fall in Brent prices to as low as $20 in the second quarter.

The oil market was already reeling after Saudi Arabia decided this month to dramatically increase supply since it and Russia could not agree to cut output in anticipation of weaker demand.

Saudi Arabia has so far ignored entreaties to act to balance the market, reiterating plans to maintain production at more than 12 million barrels per day, which would be a record.