An American and Texas flag stand in front of the Chevron Corp. Pasadena Refinery in Pasadena, Texas, U.S., on Sunday, March 8, 2020. Picture: SHARON STEINMANNN / BLOOMBERG
An American and Texas flag stand in front of the Chevron Corp. Pasadena Refinery in Pasadena, Texas, U.S., on Sunday, March 8, 2020. Picture: SHARON STEINMANNN / BLOOMBERG

London — Oil prices fell for a third session on Wednesday with US crude futures tumbling to a 17-year low as travel and social lockdowns sparked by the coronavirus epidemic knocked the outlook for demand.

US crude was down $1.15, or 4.27%, at $25.80 per barrel by 9.38am GMT, having earlier fallen to $25.68, its lowest since May 2003.

Brent crude was trading down 78c, or 2.71%, at $27.95 a barrel, after dropping to $27.86, its lowest since early 2016.

“The oil demand collapse from the spreading coronavirus looks increasingly sharp,” Goldman Sachs said in a note forecasting a fall in the price of Brent to as low as $20 in the second quarter, a level not seen since early 2002.

The bank expects a demand contraction of eight-million barrels per day (bpd) by late March and an annual decline in 2020 of 1.1-million bpd, which it said would be the most on record.

In efforts to support economies, the world's richest nations prepared to unleash trillions of dollars of spending to lessen the fallout from the coronavirus outbreak, as well as imposing social restrictions not seen since World War 2.

Rystad Energy projects a year-on-year decrease of 2.8% or a fall of 2.8-million bpd in global oil demand this year. “To put the number into context, last week we projected a decrease of just 600,000 barrels,” Rystad said.

The consultants expect demand in April to fall by 11-million bpd compared with 2019.

The effect on demand is starting to show in official statistics with Japan's trade bureau saying on Wednesday that crude imports into the world's third-biggest economy in February were down 9% from a year earlier.

Virgin Australia became the latest airline to shut down its international network with the suspension of all overseas flights, while Australian Prime Minister Scott Morrison warned that the situation could last six months or more.

Elsewhere, Iraq's oil minister pleaded for an emergency meeting between members of Opec and nonOpec producers to discuss immediate action to support the market.

A price war between Opec leader Saudi Arabia and Russia after talks on co-ordinated output cuts collapsed earlier in March, is adding pressure to the market.

Iraqi oil minister, Thamer al-Ghadhban, asked Opec to help “urgently achieve” extraordinary meetings of the Opec+ group — Opec plus partners including Russia — to “discuss all possible ways” to rebalance the oil market.

“With the Saudis and Russians in a fierce battle for market share, it is difficult to see any quick resolution on this front,” ING said referring to the Iraqi request for a meeting.

“That said, the only thing that will likely bring them back to the discussion table is even lower prices,” the bank said.

Reuters