Oil falls to $30 on recession fears and Saudi pump war
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[March 17, 2020] By
Dmitry Zhdannikov and Alex Lawler
LONDON (Reuters) - Oil fell below $30 a
barrel on Tuesday, trading close to its lowest in more than four years,
as the coronavirus pandemic hit demand and Saudi Arabia raised output to
a record as it battles with Russia for market share.
Countries including the United States and Canada, along with nations in
Europe and Asia, are taking unprecedented steps to contain the virus,
curbing demand for crude and products such as gasoline and jet fuel.
U.S. President Donald Trump warned on Monday that the United States may
be heading into recession as economic activity across the globe slowed
and stock markets tumbled.
Brent crude <LCOc1> fell as much as 1.5% on Tuesday to $29.60 a barrel
but was up 0.3% at $30.13 by 1053 GMT, having earlier touched $31.25. On
Monday it sank to $29.45, the lowest since January 2016.
"Oil has made new lows," said Tamas Varga of oil broker PVM. "There is
simply nothing, neither a fundamental nor technical development, that
implies that the rot we are experiencing will come to a halt any time
U.S. West Texas Intermediate (WTI) crude <CLc1> reversed most of an
earlier 4.7% gain to stand at $29.12.
The United States has said it will take advantage of low oil prices to
fill its Strategic Petroleum Reserve (SPR). Other countries and
companies are planning similar measures to fill storage tanks.
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Oil pump jacks work at sunset near Midland, Texas, U.S., August 21,
2019. REUTERS/Jessica Lutz
Attention will focus later on U.S. inventory reports that are expected to show
crude inventories rising for an eighth straight week.
The American Petroleum Institute releases its supply report at 2030 GMT and
government inventory data is due to be published on Wednesday.
Despite the loss of oil demand because of the global spread of the virus, Saudi
Arabia and Russia are embroiled in a price war instigated after failing to agree
to extend supply curbs to support the market.
Saudi Aramco <2222.SE> has said it is likely to carry over its planned higher
oil output for April into May and that it is "very comfortable" with an oil
price of $30 a barrel.
"There is still every sign of a price war on the oil market," said Commerzbank
analyst Carsten Fritsch.
"If the announced production increases are actually implemented, the price risks
plunging further towards the $20 mark."
(Additional reporting by Seng Li Peng, Aaron Sheldrick and Alex Lawler; Editing
by Kirsten Donovan and David Goodman)
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