Oil prices fell for the third time on Wednesday, with U.S. oil futures falling to an 18-year low, with travel and social blockages caused by the coronavirus epidemic bringing down demand prospects.
US crude oil fell $ 2.51 cents, or more than 9%, to $ 24.44 a barrel at 1219 GMT, having previously fallen to $ 24.42, the lowest since mid-2002.
The last time oil was traded so low, China just started to rise as a major global economic power that boosted world oil consumption recording the highest in subsequent years.
Brent crude was trading at $ 1.39, or nearly 5%, at $ 27.34 a barrel, after dropping to $ 27.31, the lowest since early 2016.
“The collapse in demand for oil due to the spread of the coronavirus seems increasingly pronounced,” Goldman Sachs said in a note forecasting a drop in Brent’s price to as low as $ 20 in the second quarter, a level not seen since the beginning of 2002.
The bank expects a contraction in demand of 8 million barrels per day (bpd) by the end of March and an annual decline in 2020 of 1.1 million bpd, which, he said, would be the largest ever recorded.
In efforts to support economies, the world’s richest nations have prepared to release trillions of dollars in spending to lessen the consequences of the coronavirus outbreak, as well as imposing social restrictions not seen since World War II.
Rystad Energy projects a 2.8% annual drop or a 2.8 million bpd drop in global oil demand this year. “To put the number into context, last week we projected a drop of just 600,000 barrels,” said Rystad.
Consultants expect demand in April to drop 11 million bpd compared to 2019.
The impact on demand is starting to show in official statistics, with Japan’s trading agency saying on Wednesday that oil imports into the world’s third largest economy in February fell 9% from a year earlier.
Virgin Australia has become the latest airline to close its international network by suspending all flights abroad, while Australian Prime Minister Scott Morrison has warned that the situation could last six months or more.
Elsewhere, Iraq’s Petroleum Minister called for an emergency meeting between members of the Organization of Petroleum Exporting Countries (OPEC) and non-OPEC producers to discuss immediate actions to support the market.
A price war between the leader of OPEC, Saudi Arabia and Russia, after negotiations on coordinated cuts in production collapsed this month, is adding pressure to the market.
The Kremlin said on Wednesday that Russia would like to see oil prices above current levels.
But the Saudi Arabian Ministry of Energy said it had instructed the national oil company Aramco to continue supplying oil at a record high of 12.3 million bpd in the coming months.
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 Saudis and Russians in a fierce battle for market share, it is difficult to find a quick solution on that front,” said ING, referring to the Iraqi request for a meeting.
“That said, the only thing that is likely to bring them back to the table is even lower prices,” the bank said.