Oil prices plunged 5% on Friday and posted a fifth straight weekly loss as demand destruction caused by the coronavirus outweighed stimulus efforts by policymakers around the world.
Both contracts are down nearly two thirds this year and the coronavirus-related slump in economic activity and fuel demand has forced massive retrenchment in investment by oil and other energy companies.
Brent crude settled down $1.41, or 5.35% at $24.93 a barrel. The contract fell about 8% on the week. U.S. crude settled down $1.09, or 4.82% at $21.51 a barrel. During the week, U.S. crude fell more than 3%.
“We ran out of ammunition to support the market,” said Bob Yawger, director of energy futures at Mizuho in New York. “The government used up all their bullets this week – next week the market is on its own.”
Physical crude oil traders said they expect Permian basin prices to slide by as much as another $10 a barrel by May, when tanks in the region as well as across the country are seen hitting maximum capacity. That would leave the price of a barrel of oil pumped from the Permian – where nearly 5 million barrels are extracted every day – in the single digits.
With 3 billion people in lockdown, global oil demand could be cut by a fifth, International Energy Agency head Fatih Birol said as he called on major producers such as Saudi Arabia to help to stabilise oil markets.
The calls may not be enough to bring the market back into balance.
“We have our doubts about whether Saudi Arabia will allow itself to be persuaded so easily to return from the path of revenge that it only recently embarked upon,” said Commerzbank analyst Eugen Weinberg, referring to the price war being waged between Russia and Saudi Arabia.
The Group of 20 major economies on Thursday pledged to inject more than $5 trillion into the global economy to limit job and income losses from the coronavirus and “do whatever it takes to overcome the pandemic”.
Leaders of the U.S. House of Representatives are determined to pass a $2.2 trillion coronavirus relief bill by Saturday at the latest, hoping to provide quick help as deaths mount and the economy reels.
Mainland China reported its first locally transmitted coronavirus case in three days and 54 new imported cases as Beijing ordered airlines to implement sharp reductions in international flights, for fear travellers could reignite the outbreak.
As global oil demand plummets, Saudi Arabia is struggling to find customers for its extra oil, undermining its bid to seize market share by expanding production.
The Organization of the Petroleum Exporting Countries (OPEC) and its de facto leader Saudi Arabia this month failed to reach agreement with other producers, including Russia, to curb oil production to support prices.
But the head of Russia’s sovereign wealth fund, Kirill Dmitriev, said a new supply pact between OPEC and its allies, a group known as OPEC+, might be possible if other countries join.
“It does not seem as though there is anything the Saudis or the broader OPEC+ group can do to push the market significantly higher,” said ING analyst Warren Patterson.
“The demand destruction we are seeing does mean the level of (production) cuts that would be needed by the group would be just too much to stomach,” he said.
Russian Deputy Energy Minister Pavel Sorokin said the coronavirus outbreak has dented global oil demand by 15 million to 20 million barrels per day (bpd).
Oil and gas research group JBC Energy said it had “drastically” reduced its oil demand forecast for 2020, expecting a decline of more than 7.4 million bpd on average.
Global oil demand stood at about 100 million barrels per day last year, according to the U.S. Energy Information Administration.