Houston Chronicle

The price of oil collapsed Wednesday to about $24 a barrel, past the trough of the most recent oil bust and to its lowest level in nearly two decades.

Oil falls to nearly $24, its lowest price since 2002- oil and gas 360

Source: Houston Chronicle

West Texas Intermediate crude was trading at $24.43 a barrel early Wednesday morning, off more than 10 percent from Tuesday and the lowest since the price hit $24.29 a barrel in June 2002. The U.S. benchmark is now lower than the bottom of the last crash, $26.21 a barrel in February 2016.

“The weak global economy was not ready for COVID-19, which is why we are seeing escalated panic in the markets,” Louise Dickson, an analyst with Norwegian research firm Rystad Energy, said in a statement. “This is the most dismal oil demand picture we have witnessed in a long time with a simultaneous collapse in jet fuel, gasoline, shipping fuel, petrochemicals, and oil used for power generation.”

Analysts fear historically low prices will exacerbate the oil glut, causing supplies to exceed the available global storage capacity. At these prices, there could be an oversupply of more than 10 million barrels per day in the second quarter, an increase of nearly 1 billion barrels in just one quarter, according to Rystad Energy.

Oil markets began their decline March 9, which saw the biggest one-day decline since the First Gulf War 30 years ago. Crude plunged 25 percent, or more than $10 a barrel, to settle at $31.13 per barrel. The price is more than 50 percent off its high this year of $63.27 on Jan. 6, a week after the novel coronavirus was identified.

The crash came after OPEC and its allies failed to strike a deal this month with Russia to reduce production as demand declined during the dramatic economic slowdown caused by the coronavirus pandemic. The virus, which causes a respiratory disease called COVID-19, has sickened more than 194,000 people and killed more than 7,800 people worldwide.

If the pandemic is not contained and oil-producing countries don’t lower production, oil prices could remain depressed well into 2021, Dickson said.

Rystad Energy estimates OPEC’s spare capacity at 2 million barrels per day, which could jump to 3 million barrels per day if Libya’s nearly 1 million-barrel-per-day production comes back online.

“We don’t expect Saudi Arabia or Russia and other core OPEC like the UAE and Kuwait to step back from their promise to ramp up production,” Dickson said. “What we are seeing here is essentially the atomic bomb equivalent in the oil markets.”


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