Oil hits 17-year low as lockdowns spread

London: Benchmark WTI oil on Wednesday slumped 12 percent to the lowest level since 2002, at under $24 per barrel, as the coronavirus slashes global demand for crude.

WTI slid to $23.60 per barrel, while Brent North Sea oil touched a 2003 trough at $26.65 a barrel. Oil prices fell for a third session with US crude futures tumbling to an 18-year low and Brent hitting a more than 16-year low as travel and social lockdowns to counter the coronavirus raised prospect of the steepest ever annual fall in oil demand.

U.S. crude was down $2.82, or 10.5 percent, at $24.13 a barrel, having earlier touched its lowest since April 2002 at $23.60. The last time oil traded that low was when China had only just begun its rise as a global economic superpower that propelled the world’s oil consumption to record highs in subsequent years.

Brent crude was trading down $1.91, or 6.7 percent, at $26.82 a barrel after dropping as low as $26.65, its weakest since late 2003.

Both contracts were on track for a quarterly decline of about 60 percent, the sharpest since at least the 1980s. Investment banks and consultancies have been making heavy cuts to their demand forecasts as a growing number of the world’s largest cities and economies restrict movement.

“The oil demand collapse from the spreading coronavirus looks increasingly sharp,” Goldman Sachs said in a note, forecasting a fall in Brent prices 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.

Rystad Energy has gone even further, projecting a year-on-year decline in demand of 2.8 million bpd, or 2.8 percent, this year. “To put the number into context, last week we projected a decrease of just 600,000 barrels,” Rystad said.

In addition to imposing social restrictions not seen since World War Two, the world’s richest nations prepared to unleash trillions of dollars of spending to reduce the fallout from the coronavirus.

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 percent from a year earlier.

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.

Iraq’s oil minister, Thamer al-Ghadhban, asked the OPEC to help to instigate urgent extraordinary meetings of the broader OPEC+ group, which includes Russia, to “discuss all possible ways” to rebalance the 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.

“That said, the only thing that will likely bring them back to the discussion table is even lower prices.”

A price war between OPEC leader Saudi Arabia and Russia after the collapse of talks on coordinated output cuts is increasing pressure on the market.

The Kremlin on Wednesday said that Russia would like to see the oil price higher than current levels. Saudi Arabia’s energy ministry, however, said it had directed national oil company Aramco to continue to supply crude oil at a record high 12.3 million bpd over the coming months.

The commodity had enjoyed an early advance Wednesday after US and European governments indicated they will unleash more stimulus measures, with the United States flagging a package of more than $1 trillion.

"The ongoing producer price war, and the exponential increase in countries closing borders, crushed any rebound hopes," said Jeffrey Halley, senior market analyst from OANDA.

The price war began last week after OPEC kingpin Saudi Arabia pushed an informal alliance of major crude producers to slash output to combat the impact on prices from the virus outbreak.

But alliance partner and non-OPEC member Russia, the world´s second-biggest oil producer, refused -- prompting Riyadh to drive through massive price cuts and pledge to boost output.