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Oil prices dropped further at the beginning of Monday, as the rapid spread of coronavirus Covid-19 hit global financial markets. Meanwhile, an emergency rate cut by the US Federal Reserve failed to calm the tension in the financial markets.
In addition, the price war between top producers Russia and Saudi Arabia has lead to fears of greater oversupply.
According to Reuters, Brent crude futures were down by $1.13 to $32.72 a barrel at 2:30 UTC.
US crude was down $1.38 to $30.35, even after US President Donald Trump directed the US Department of Energy on Friday to buy crude oil for the Strategic Petroleum Reserve.
The US dollar fell against many currencies after the US Federal Reserve made its second emergency interest rate cut. It said it would expand its balance sheet by at least $700bn in coming weeks.
RBC Capital markets analyst Michael Tran was quoted by Reuters as saying: “While helpful on the margin, such [Strategic Petroleum Reserve] policy pales in comparison to a coronavirus plagued market that is measured in months or a price war that is expected to last several quarters or longer.”
Global coronavirus impact
The outbreak of coronavirus has caused global demand to decrease, while oil producers have ramped up production.
Global coronavirus cases continue to surge, with Europe being considered as the current epicentre of the pandemic.
Meanwhile, the death toll from the virus has crossed 6,500 as of the end of 15 March.
The recoveries have increased to about 77,200, with a total of more than 169,300 confirmed cases worldwide.
Several countries have enacted travel bans, including the US banning travel from Europe. The virus spread rapidly in Italy, where the government ordered a national lockdown last week.
OCBC Bank economist Selena Ling said: “The end-game to me remains not about more policy bazookas, but a peak in global COVID-19 infections and fatalities, and, or a COVID-19 vaccine cure on the horizon.”