U.S. crude hits 17-year low as lockdowns, restrictions
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[March 18, 2020] By
LONDON (Reuters) - Oil prices fell for a
third session on Wednesday with U.S. crude futures tumbling to a 17-year
low as travel and social lockdowns sparked by the coronavirus epidemic
knocked the outlook for demand.
U.S. crude <Clc1> was down $1.51 cents, or 5.6%, at $25.44 per barrel by
1135 GMT, having earlier fallen to $25.06, its lowest since late April
The last time oil was trading that low, the United States had invaded
Iraq and China had only begun its rise as a major global economic power
that propelled the world's oil consumption to record highs in subsequent
Brent crude <LCOc1> was trading down 95 cents, or 3.31%, at $27.78 a
barrel, after dropping to $27.56, its lowest since early 2016.
"The oil demand collapse from the spreading coronavirus looks
increasingly sharp," Goldman Sachs said in a note forecasting a fall in
the price of Brent to as low as $20 in the second quarter, a level not
seen since early 2002.
The bank expects a demand contraction of 8 million barrels per day (bpd)
by late March and an annual decline in 2020 of 1.1 million bpd, which it
said would be the biggest on record.
In efforts to support economies, the world's richest nations prepared to
unleash trillions of dollars of spending to lessen the fallout from the
coronavirus outbreak, as well as imposing social restrictions not seen
since World War Two.
Rystad Energy projects a year-on-year decrease of 2.8% or a fall of 2.8
million bpd in global oil demand this year. "To put the number into
context, last week we projected a decrease of just 600,000 barrels,"
The consultants expect demand in April to fall by 11 million bpd
compared with 2019.
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Pump jacks operate at
sunset in Midland, Texas, U.S., February 11, 2019. REUTERS/Nick
The impact on demand is starting to show in official statistics with Japan's
trade bureau saying on Wednesday that crude imports into the world's
third-biggest economy in February were down 9% from a year earlier.
Virgin Australia became the latest airline to shut down its international
network with the suspension of all overseas flights, while Australian Prime
Minister Scott Morrison warned that the situation could last six months or more.
Elsewhere, Iraq's oil minister pleaded for an emergency meeting between members
of the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC
producers to discuss immediate action to support the market.
A price war between OPEC leader Saudi Arabia and Russia after talks on
coordinated output cuts collapsed this month is adding pressure to the market.
The Kremlin said on Wednesday Russia would like to see the oil price higher than
Iraqi oil minister, Thamer al-Ghadhban, asked OPEC to help "urgently achieve"
extraordinary meetings of the OPEC+ group - OPEC plus partners including Russia
- to "discuss all possible ways" to rebalance the oil market.
"With the Saudis and Russians in a fierce battle for market share, it is
difficult to see any quick resolution on this front," ING said referring to the
Iraqi request for a meeting.
"That said, the only thing that will likely bring them back to the discussion
table is even lower prices," the bank said.
(Additional reporting by Aaron Sheldrick in Tokyo; editing by Elaine Hardcastle
and Jason Neely)
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