/Futures Movers: U.S. oil falls to a nearly 18-year low as rout continues on coronavirus fears, price war

Futures Movers: U.S. oil falls to a nearly 18-year low as rout continues on coronavirus fears, price war

Oil futures extended their plunge Wednesday as countries continued to lock down to slow the spread of COVID-19, while Saudi Arabia and Russia remain on track to flood the world with crude in a global price war.

“Oil is by far one of the biggest casualties from the novel coronavirus outbreak,” said Lukman Otunuga, senior research analyst at FXTM. “WTI crude and Brent have both depreciated a staggering 60% since the start of 2020 and could extend losses as the pandemic darkens the outlook for fuel demand.”

“To rub salt into the burning wound, the raging price war between Saudi Arabia and Russia is fuelling oversupply concerns,” he told MarketWatch, adding that WTI oil may test $20 “if nothing changes.”

West Texas Intermediate crude for April delivery

CL.1, -14.88%

on the New York Mercantile Exchange fell $3.56, or 13%, to $23.39 a barrel, with the front-month contract trading around the lowest since 2002, according to Dow Jones Market Data. May Brent crude

BRNK20, -8.91%

dropped $2.21, or 7.7%, at $26.52, with prices trading at their lowest since 2003.

Dow Jones Market Data

Adjusted for inflation, front-month Nymex WTI oil trades at its lowest level since March 1999, according to Dow Jones Market Data.

“Growing hopes for fiscal stimulus are so far being squashed by near-term demand worries. The European Union confirmed restrictions on travel, while players in the European automotive and aerospace industries were heard winding down production, a development that could spell further trouble for petrochemical players,” wrote analysts at Vienna-based JBC Energy, in a note.

The Trump administration has signaled support for a stimulus package of $1 trillion or more, including direct payments to individuals and rescue packages for industries. The Federal Reserve, after moving to slash rates to nearly zero on Sunday and taking additional stimulus measures, on Tuesday unveiled a commercial paper facility aimed at providing a liquidity backstop to the market. Later in the day it also unveiled a Primary Dealer Credit Facility.

Meanwhile, following a failed attempt to reach an agreement to further curb oil production, current production cuts by the Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, are set to expire at the end of this month.

Read: Why Russia wants to crush U.S. shale oil producers in price war

The sell-off for oil is “extremely intense now, and if Saudi Arabia and Russia don’t get their act together, we could see it falling all the way to $22,” said Naeem Aslam, chief market analyst at AvaTrade, in a market update.

Oil prices lost more ground after data from the Energy Information Administration Wednesday revealed an eighth consecutive weekly rise in U.S. crude supplies.

U.S. crude supplies rose by 2 million barrels for the week ended March 13, according to the EIA. Analysts polled by S&P Global Platts expected the data to show a rise of 2.6 million barrels. The American Petroleum Institute on Tuesday reported a fall of 421,000 barrels.

The EIA data showed supply declines of 6.2 million barrels for gasoline and 2.9 million barrels for distillates. The S&P Global Platts survey had shown expectations for supply declines of 3.8 million barrels for gasoline and 3.2 million barrels for distillates.

On Nymex, April gasoline

RBJ20, -5.89%

 fell 5.3% to 67.37 cents a gallon, with prices for the front-month contract set for a record low settlement based on data going back to 2005, according to Dow Jones Market Data. April heating oil lost 6.8% to 96.51 cents a gallon.

April natural gas

NGJ20, -6.30%

 lost 6.1% to $1.623 per million British thermal units.

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