Oil falls to $30 on recession fears and Saudi pump war

[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 soon."

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.

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)

[© 2020 Thomson Reuters. All rights reserved.]

Copyright 2020 Reuters. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.  Thompson Reuters is solely responsible for this content.