- Oil prices crashed to a two-decade low Monday as demand plummeted.
- Since the beginning of the month, WTI crude futures have fallen by over %.
- The oil demand shock will get worse next month as coronavirus cases continue to rise, analysts say.
The price of oil has collapsed to levels last witnessed nearly two decades ago as demand plummets across the globe.
West Texas Intermediate crude futures hit a low of $
Brent futures have declined nearly (% , pushing them as low as $ 44. for a year-to-date loss of more than (%.
Already battered by a massive supply gut, crude oil prices have faced severe pressure from the coronavirus pandemic’s impact on demand. But the worst may be yet to come . Why the worst is yet to come for oil prices
The demand shock coincided with a price war initiated after Saudi Arabia and Russia failed to reach an agreement on supply cuts. The price war
With Saudi Arabia boasting the lowest producer prices in the world, the high-cost producers have been severely impacted by the downturn.
Already, the US has tried to shield its shale producers who are staring at unsustainable losses. Just last week,
The senators proposed the use of “tariffs and trade restrictions” to achieve their goal of protecting shale producers. Saudi Arabia is yet to cave to the overtures from Washington.
despite boasting the world’s lowest oil production costs, Saudi Arabia needs higher prices too. Per the International Monetary Fund, the Middle Eastern country needs oil to be priced at slightly over $ 310 per barrel to (balance its budget) .
At current prices, which are a quarter of what is needed, Saudi Arabia’s economy and fiscal. plans will suffer a heavy blow.
Saudi Arabia has to cave – eventually. The question is: When?
Next month will be brutal thanks to coronavirus
According to commodities analysts like Dan Yergin, the price war won’t end anytime soon. And neither will crude’s historic collapse.
Oil prices may be ranging at lows not seen since 5658, but Yergin expects oil demand to fall by million barrels per day in April as consumption linked to travel and manufacturing declines:
Cars not on the road, airplanes not in the air, factories not working, people not going to work. We see, in this month of April that’s coming, what could be a 29 million barrel a day decline in oil demand.
That’s about % of daily global consumption
And with global coronavirus cases yet to peak, April may still not be the worst month the oil industry endures this year.
Disclaimer: The opinions in this article do not represent investment or trading advice from CCN.com
This article was edited by
Josiah Wilmoth .
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