Oil plunges to lowest level since 2003

LONDON: Oil prices slumped a new on Friday with Brent North Sea crude plumbing a 17-year low owing to massive oversupply as the coronavirus crisis paralyses global demand.

Around 1435 GMT, Brent for May delivery was down 7.33 percent from Thursday, at $24.41 a barrel. West Texas Intermediate fell 5.97 percent to $21.25.

Oil has tanked in recent weeks on the back of collapsing demand, as COVID-19 slams the brakes on economic activity and the world´s appetite for energy.

Crude futures spiralled even lower this month after a fierce price war erupted between Riyadh and Moscow.

“The coronavirus pandemic is reducing oil demand,” wrote analysts at the Wood Mackenzie research consultancy in a note to clients.

“The OPEC+ production restraint agreement fell apart on 6 March and Saudi Arabia is rapidly increasing supply.

“The result: Brent crude has plunged,” they added.

Until recently, the Organization of the Petroleum Exporting Countries (OPEC) and Russia had cooperated closely since 2016 to curb production, support prices and protect their precious revenues.

That all changed this month when Saudi Arabia launched a price war with Moscow, after OPEC and non-member Russia failed to clinch an output-cutting deal to curb the market impact of the deadly COVID-19 outbreak.

The perfect storm has sent oil prices collapsing to their lowest levels in almost two decades, while also stretching global crude storage capacity.

“With Saudi Arabia attempting to flood the oil market by ramping up production to counter Russia, oil prices have halved this month … prompting countries to stockpile under the low prices,” said Sun Global Investments head Mihir Kapadia.

“Oil stockpiles around the world climbed up as major refineries in core markets such as China were shutdown due to the pandemic.

“According to industry reports oil storage levels globally have already reached 75 percent of capacity, and continued stockpiling under closed demand would crash the prices to $10 in the coming months unless industrial activity restarts.”