US crude hits 17-year low as lockdowns, restrictions spread

An oil worker near Midland Texas in the United States where several energy companies on Monday said they are cutting drilling activity and budgets becoming the latest North American shale producers to be hit by lower oil prices which fell below $30 [F

An oil worker near Midland Texas in the United States where several energy companies on Monday said they are cutting drilling activity and budgets becoming the latest North American shale producers to be hit by lower oil prices which fell below $30 [F

Oil prices fell Wednesday, as concerns about the rapidly spreading coronavirus pandemic and an escalating price war eclipsed pledges by major economies to launch stimulus measures.

The oil crash follows the crude exporter's decision to hike production from April and offer the biggest price cuts in two decades, in retaliation for Russia's refusal to tighten supply as the virus saps demand.

Brent crude was down $3.75, or 11.1%, to $30.10 a barrel by 1:26 p.m. EDT (1726 GMT).

"We're now seeing both Brent and WTI prices closing in on their 2016 lows, which could well open a move to levels last seen in 2003, down towards $20 a barrel which, if sustained, is likely to be enormously painful for some USA shale producers, as well as the Gulf states".

US West Texas Intermediate (WTI) crude reversed most of its earlier 4.7% gains to stand at $29.04 a barrel.

The Kremlin on Wednesday said that Russian Federation would like to see the oil price higher than current levels.

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The ministry did not say how much crude will Saudi Arabia export in April, when it has said it plans to raise its oil supply to a record 12.3 million bpd.

Crude prices have posted sharp losses at the start of the week. Many forecasters have adjusted down estimates on demand for crude, as the virus disrupts business activity, travel and daily life.

Saudi Arabia said last week it would launch a program to boost production capacity for the first time in more than ten years. Elsewhere, Iraq's oil minister pleaded for an emergency meeting between members of the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producers to discuss immediate action to help balance the oil market. Last time oil fell below $ 27 in September 2003. Prior to this, the largest six-month global surplus this century was 360 million barrels.

"The lower priced Brent will be attracting additional cargoes toward Europe, while the comparatively high priced WTI will be enticing imports into the USA, while at the same time, curtailing export activity as the Saudi's attempt to re-gain some long lost market share", said Jim Ritterbusch, President of Ritterbusch and Associates in Galena, Illinois, in a report.

The Bank of Japan later stepped in by easing monetary policy further, while Gulf central banks also cut interest rates. The global benchmark fell 4.3 percent on Tuesday.

The supply and demand shocks have hammered Wall Street's outlook for oil. Rystad Energy projects a year-on-year decline in demand of 2.8 million bpd, or 2.8%, this year. China, the world's second-largest consumer of oil after the US, has seen demand for crude shrink by more 20 percent. Brent crude prices have fallen nearly 45% in March alone, following the most pronounced demand destruction since the financial and economic crisis of 2008.

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