The session on Monday (March 30), WTI oil price in the US sometimes dropped by 9.4%, reaching USD 19.35 per barrel, the lowest level in the past 18 years. Meanwhile, Brent oil price fell 12%, trading at 22.95 USD per barrel. This price was last established in 2002.
This morning (March 31), prices rebounded. Currently, each Brent barrel increases 0.79% to USD 22.94. And WTI oil increased by 2.79% to USD 20.65.
With much of the world "motionless" during the pandemic, oil demand has plummeted vertically. People stopped traveling and businesses stalled, leading to a sharp drop in gasoline and jet fuel consumption.
The demand weakened as OPEC +’s commitment to cut production expires. Starting from 1/4, the OPEC 14-member coalition and some other major oil exporters have the right to inject as much oil into the market as they want. In particular, Saudi Arabia is one of the countries announced to promote production.
With pressure on supply and demand, analysts expect WTI oil prices to fall 54% this month but the worst is still ahead. "The impact of Covid-19 continues to affect demand, and the maximum global storage capacity of crude oil in the second quarter will create a" nightmare "scenario. It is possible that crude oil could be tested. challenge around 10 USD per barrel, "said Raymond James, an analyst at John Freeman.
Bank of America lowered its oil price forecast again yesterday (March 30). "On a quarterly basis, we forecast to witness the sharpest decline in global oil consumption ever recorded," said Francisco Blanch, head of the bank’s analysis group.
The sharp drop in oil prices has led energy companies to cut spending plans. US-based exploration and manufacturing companies are among the hardest hit. These companies are struggling to break even. Some analysts believe that there will be a wave of consolidation and bankruptcy taking place.
"The oil supply chains were disrupted, due to the ’unbelievable’ loss of demand, forcing all to adjust their supply chains in April and May: Increasing storage, cutting house rates. The refinery operates and stops supplying upstream, "said Rystad Energy, head of the oil market of Bjornar Tonhaugen. The company plans to cut 16 million barrels of oil a day in April.
Last week, the US State Department confirmed that Secretary Mike Pompeo spoke to Saudi Crown Prince Mohammed bin Salman. The meeting came after President Trump said the US would intervene in oil prices when appropriate.
