Coronavirus: Oil price collapses to lowest level for 18 years

Coronavirus: Oil price collapses to lowest level for 18 years”

Oil prices have been tumbling since the beginning of this month, as the OPEC+ nations failed to agree on production cuts, and Saudi Arabia threatened to flood the market with oil.

Oil prices also suffered losses after Saudi Arabia, the leader of the Organisation of Petroleum Exporting Countries, failed to reach an agreement with Russian Federation for an extension of production cuts beyond March.

A readout of the call from the Kremlin said the two presidents agreed to hold talks on the state of the oil market at the ministerial level.

"It appears that the Saudis are on a mission to drive marginal USA producers off of the playing field in re-capturing market share", said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois. The White House did not immediately respond to a request for comment.

Saudi Arabia, the de facto leader of OPEC, and Russian Federation, which had allied with OPEC to curb output for more than three years beginning in late 2016, remain at loggerheads. Prices have fallen so low that in Canada, a barrel of oil costs less than a pint of beer.

Global demand for oil could fall by 20 percent as 3 billion people around the world live in lockdown.

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Schork was a bit more optimistic, suggesting that while oil prices have entered the "danger zone", producers are hedged so they are selling oil at $45, $50, $55 a barrel.

That has threatened the highly leveraged USA shale industry. "They're not willing to invest additional funds in an industry that's under such significant pressure", Lipow said.

"The unprecedented pace of demand destruction has forced the hand of refineries, on a global level, to issue run cuts, leaving barrels from the the North Sea, to Asia searching, often unsuccessfully, for homes". "They [Russia and Saudi Arabia] both went insane", Trump told Fox News earlier on Monday.

The US banking group Goldman Sachs said oil well shut-ins had reached at least 900,000 barrels of oil a day, but "the true number [is] likely higher and growing by the hour".

At session lows, oil touched US$19.27 a barrel - the weakest intraday price since February 2002.Brent crude, the world's benchmark, tumbled as much as 13 per cent and fell to as low as US$21.65 a barrel, its lowest point in 18 years.

U.S. crude output fell to 12.7 million bpd in January from 12.8 million bpd in December, the U.S. Energy Information Administration (EIA) said in a monthly report on Tuesday. The president said he wanted to discuss trade with Putin, though he said he expected the Russian president to raise objections to USA sanctions.

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