Oil extends losses, falling below $30 a barrel
Saudi Arabia is expected to keep oil output high in May, with Aramco saying it is ‘very comfortable’ with $30 a barrel
Singapore/London — Oil prices fell below $30 a barrel on Tuesday, extending losses after shedding a 10th of their value on Monday, as the coronavirus pandemic hit demand, while Saudi Arabia raised output to a record as it battles with Russia for market share.
Brent crude was 0.5% lower at $29.91 a barrel at 9.46am GMT having earlier risen as high as $31.25 a barrel. US West Texas Intermediate (WTI) crude reversed most of its earlier 4.7% gains to stand at $29.04 a barrel.
US President Donald Trump warned that the US may be heading into recession as economic activity across the globe slowed and stocks tumbled. The US has said it will take advantage of low oil prices to fill its strategic petroleum reserve (SPR), and other countries and companies are planning similar measures to fill storage tanks.
“But those storage facilities are rapidly filling,” said Stephen Innes, chief markets strategist at AxiCorp. “If storage does fill, quashing that demand, oil prices are sure to collapse further, and the global markets will then have to hope that the dispute between Saudi Arabia and Russia is resolved before we reach that point of no return.”
Amid heavy demand loss from the global spread of the coronavirus that causes Covid-19, Saudi Arabia and Russia started a price war after failing to agree to extend their pact to cut output to support the market.
Saudi Aramco has said it will likely carry over its planned higher oil output for April into May, and that it is “very comfortable” with an oil price of $30 a barrel.
“Much focus is also falling on the Russians and Saudis, with no expectations for either side to blink unless oil collapses towards the $15 region ... If we see oil falls below the $20 level, the Saudis may decide to come back to the negotiating table, however maybe just with [oil cartel] Opec and not the Russians,” said Edward Moya of Oanda.
Countries including the US and Canada and nations in Europe and Asia, in the meantime, are taking unprecedented steps to contain the virus, severely crippling demand for crude and refined products including gasoline and jet fuel.
Petrol refining margins in the US, the world’s largest consumer of petrol, plunged about 95% on Monday, briefly turning negative, as people stayed off the roads.
In Asia, margins for transportation fuels had also plunged after more countries imposed travel restrictions and curbed domestic movement as part of measures to slow the spread of the coronavirus.