Oil prices have dropped for a third straight day on Wednesday, as US crude futures sank to a 17-year low. The coronavirus pandemic has caused travel restrictions and social lockdowns, contributing to market instability.
According to Reuters, Brent crude prices down by $0.78, at $27.95 a barrel. This fall of 2.71% seems small compared to the 4.27% fall in US crude. The selling price for this was down $1.15 cents, at $25.80 per barrel. Earlier in the day it fell to $25.68, the lowest price since May 2003.
In a note, Goldman Sachs said : “The oil demand collapse from the spreading coronavirus looks increasingly sharp.”
Larger economies are set to release trillions of dollars to reduce the fallout from the Covid-19 outbreak. Many nations are also imposing social restrictions of levels not seen since the Second World War.
Meanwhile, price war between major oil producers Saudi Arabia and Russia continues. Since the collapse of an agreement on supply cuts proposed by the Organisation of the Petroleum Exporting Countries (OPEC), the nations have continuously increased production. Outsiders such as the US have called for de-escalation.
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The suggested cut of 1.5 million barrels per day would have countered lower demand due to coronavirus outbreak. As it stands, investors expect a large over-supply of oil this year.
CMC Singapore markets analyst Margaret Yang said: “A deeply imbalanced supply and demand relationship will keep putting oil prices under pressure.
“Major oil producers are ramping up oil supply in a time when global demand is dampened by border controls and traffic bans.”
Coronavirus global impact
The Covid-19 death toll has increased to more than 7,900 globally. A total of more than 198,000 confirmed cases and 81,000 recoveries are confirmed as of the end of 17 March.
The World Health Organization has called for countries in South-East Asia to implement ‘aggressive’ measures to fight the COVID-19 pandemic.
Case numbers are now growing faster outside China than within. Europe is now considered the epicentre of the virus, and several countries have enacted travel bans. These include the US banning travel from Europe, lowering kerosene demand.