Oil Prices Drop to 17-Year Low as Coronavirus Crisis Deepens
Oil prices have fallen to their lowest levels in 17 years as the sell-off across commodity and financial markets continued this week due to the worsening Coronavirus pandemic. Markets around the world suffered sharp losses on Wednesday as global investors liquidated holdings across stocks, bonds and commodities in favour of the safety of cash.
Weak oil demand due to the economic impact of the spread of the epidemic, exacerbated by an oil price war between Saudi Arabia and Russia over the past few weeks, has led to more than a 60% collapse in benchmark crude prices since the beginning of the year. Brent crude futures for May settlement fell to just below US$25 per barrel on Wednesday, levels that were last witnessed in April 2003. U.S. benchmark WTI crude dipped below US$21 per barrel for the first time since March 2002.
World oil consumption is expected to fall dramatically this year, as the virus outbreak destroys near-term demand due to travel restrictions, quarantines and industrial shutdowns, and triggers a global recession or even an longer drawn-out economic depression. To make matters worse, Saudi Arabia reiterated plans this week to ramp-up its oil production and exports over the coming months, putting further downward pressure on prices, with some analysts now predicting prices could drop as low as US$10 per barrel.