The great oil crash of 2020 ain’t over yet. US crude plunged nearly 7% and finished at an 18-year low of $20.09 a barrel Monday as the coronavirus pandemic continues to deal a devastating blow to energy demand. Therefore, oil price crashes due to the pandemic and the battle between Russia and Saudi Arabia.
At session lows, oil price touched $19.27 a barrel. In fact, the weakest intraday price since February 2002. Brent crude, the world’s benchmark, tumbled as much as 13% and fell to as low as $21.65 a barrel, its lowest point in 18 years. Brent settled at $22.76 a barrel, the lowest close since November 2002.
Global oil consumption will likely crater by 12 million barrels per day this quarter, or 12%. Meanwhile, the steepest decline ever recorded, according to Bank of America.
“It is very ugly and there is no way to sugarcoat it,” Bank of America commodity analysts wrote in a Monday note to clients.
At the same time, Saudi Arabia and Russia are flooding the world with excess oil. It is when at exactly the time when the opposite approach is required. That price war is exacerbating the pain in the oil market.
Those two factors have driven US oil prices down by a stunning 68% since the recent peak of $63.27 a barrel in early January.
Sub-$2 Gasoline Prices
That shock has amplified the epic battle between Russia and Saudi Arabia. First, Russia refused to cut production despite the obvious need for less supply. That refusal is driven by its desire to drown high-cost US producers in a sea of cheap crude in hopes of recapturing market share.
Second, Saudi Arabia responded by threatening to ramp up production and slashing prices further still. That caused an historic collapse in oil prices, exactly the opposite of what was needed to stabilize the shaken market.
Yet many Americans can’t take advantage of cheap gas prices because of the severe travel restrictions imposed to fight the
coronavirus pandemic. Most people are working from home, and few are taking road trips.
