Crude Oil Slumps Back Near 18 Year Lows

Crude Oil Slumps Back Near 18 Year Lows

Crude Oil Slumps Back Near 18 Year Lows

The threat of a global recession triggered by the coronavirus pandemic had already hammered prices when Riyadh pledged last month to raise exports after a production-cut agreement among top producers flopped.

Oil prices fell on Monday, with USA prices briefly dropping below $20 a barrel and global benchmark prices for Brent oil falling to an 18-year low.

The 2020 outlook for West Texas Intermediate crude was slashed to $35.29 a barrel from last month's forecast for $55.75.

This has led U.S. oil production to rise from 8.8 million bpd in 2016 prior to the OPEC+ agreement to a record level of 13 million bpd after 39 months of the agreement, and the majority of this increase in production came from the Permian Basin, whose production rose from 2 million bpd in 2016 to more than 5 million bpd (exceeding Iraqi production). Saudi Arabia and other OPEC members have not agreed to hold a technical meeting in April to discuss sliding prices.

Pledges of higher output from Saudi Arabia and Russian Federation after a supply pact collapsed and a slide in demand due to the coronavirus outbreak have hammered the market.

Saudi Arabia's move came after Russian Federation has opposed its proposal to cut oil production to stabilize oversupplied oil markets.

However, Saudi unloaded the full weight of its oil production capability on Wednesday, ramping up production to more than 12m barrels a day.

One of the major consequences of coronakrisen is that the price of oil plummets.

According to the analysts, the daily consumption of oil could plunge by 15-22 million barrels this month vs the same period a year ago.

Still, there has been some upside from the collapse in prices as China has increased USA crude purchases, Reuters reported, with some buyers snapping up cargoes at the widest discounts ever as sellers seek to offload excess supplies in Asia.

Trump has previously said that low oil prices, which have led to low gasoline prices, were helpful to consumers.

So far, Riyadh has insisted that it will only back away from a decision to flood the global market if all the world's leading producers - including the US - agree to cut output. From there, the crude will then get re-exported as part of Saudi Arabia's plan to supply as much as it can, at deep discounts, into a market that doesn't need the supply.

"This will likely be a game changer for the industry", the bank said. But the weakness in physical markets shows market participants concentrating on the avalanche of coming supply running into a worldwide collapse in demand, which has driven WTI oil back towards $20 a barrel after a run-up as high as $21.89 on Tuesday. Saudi Arabia's production rose to more than 12 million bpd in the most recent months, according to sources.

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