Oil projected to touch $20/bbl next quarter

London, March 18: Benchmark WTI oil on Wednesday slumped 12 per cent to the lowest level since 2002, at under $24 per barrel, as the coronavirus slashes global demand for crude.

WTI slid to $23.60 per barrel, while Brent North Sea oil touched a 2003 trough at $26.65 a barrel. This is the third straight day of losses for crude oil this week.

Investment banks and consultancies have been making heavy cuts to their demand forecasts as a growing number of the world’s largest cities and economies restrict movement.

“The oil demand collapse from the spreading coronavirus looks increasingly sharp,” Goldman Sachs said in a note, forecasting a fall in Brent prices to as low as $20 in the second quarter, a level not seen since early 2002.

The bank expects a demand contraction of 8 million barrels per day (bpd) by late March and an annual decline in 2020 of 1.1 million bpd, which it said would be the biggest on record.

Rystad Energy has gone even further, projecting a year-on-year decline in demand of 2.8 million bpd, or 2.8 per cent, this year.

“To put the number into context, last week we projected a decrease of just 600,000 barrels,” Rystad said.

In addition to imposing social restrictions not seen since World War Two, the world’s richest nations prepared to unleash trillions of dollars of spending to reduce the fallout from the coronavirus.

The impact on demand is starting to show in official statistics, with Japan’s trade bureau saying on Wednesday that crude imports into the world’s third-biggest economy in February were down 9 per cent from a year earlier.

Virgin Australia became the latest airline to shut its international network with the suspension of all overseas flights, while Australian Prime Minister Scott Morrison warned that the situation could last six months or more.

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 support the market.

A price war between Opec leader Saudi Arabia and Russia after the collapse of talks on coordinated output cuts is increasing pressure on the market.

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

Saudi Arabia’s energy ministry, however, said it had directed national oil company Aramco to continue to supply crude oil at a record high 12.3 million bpd over the coming months.