Oil drops to 4-year low — and gas follows

Crude settles below $30 with demand plummeting globally

The U.S. benchmark price for crude tumbled below $30 a barrel Monday, a four-year low, as global demand collapses amid the coronavirus pandemic, sending fuel prices lower and putting pressure on oil refiners.

Oil refiners’ margins had been cushioned by nosediving crude costs, but that will be almost impossible to sustain if demand keeps collapsing.

“Fuel is getting crushed,” said Phil Flynn, senior market analyst at Price Futures Group. “The demand destruction we feared is already taking place.”

As evidence, the average price of gasoline in Houston plunged by 10 cents a gallon over the weekend. A gallon of regular on Monday morning cost between $1.69 and $1.94, according to GasBuddy, a website that tracks fuel prices nationwide. Prices here are 37 cents lower than a year ago.

Nationally, prices fell 14 cents a gallon to $2.22, down 21 cents during the past month and 33 cents from a year ago.

With airlines cutting the number of flights daily and a growing number of European countries in lockdown, oil markets are heading for an unprecedented glut. People are driving far less, decreasing demand for gasoline and diesel. Meanwhile, Saudi Arabia and Russia are planning to boost crude production as they engage in a price war for market share.

“It’s a double whammy,” said Scott Bauer, chief executive officer of Prosper Trading Academy in

Chicago. “We haven’t seen the worst of it yet. There’s further downside for the oil market, but it’s anyone’s guess how deep this goes. There’s not an expert in the world that could have predicted this.”

The spectacular plunge in crude prices hasn’t deterred state-run Saudi Aramco from pumping historic levels of oil. The company plans to produce at its maximum capacity of 12 million barrels a day in April, CEO Amin Nasser told investors, adding, “I doubt if May will be any different.”

West Texas Intermediate crude for April delivery fell 9.6 percent to settle at $28.70 a barrel on the New York Mercantile Exchange. Brent crude settled $3.80 lower, or 11 percent, at $30.05 a barrel.

The tumbling crude prices continue to reverberate through the industry.

Houston oil company EOG Resources on Monday said it would cut its 2020 capital budget by nearly one-third to between $4.3 billion and $4.7 billion. And Irving-based oil company Pioneer Natural Resources said it plans to cut its capital budget by 45 percent to between $1.7 billion and $1.9 billion.