The beating world oil prices are taking due to the price war ignited only last Sunday by Saudi Arabia against Russia became much worse Thursday after President Donald Trump's ill-advised European travel ban added fuel to the fire burning down OPEC's power to exert some control over tumbling world oil prices.
Oil prices plummeted Thursday after Trump in a much-maligned Wednesday speech inexplicably blamed Europe for worsening the COVID-19 pandemic in the U.S. Trump then decided to punish the continent for this crime by imposing a travel ban guaranteed to further cripple the wounded airline, travel and leisure industries suffering losses in the hundreds of billions of dollars due to COVID-19.
Rystad Energy estimates Trump's inane travel ban with Europe will cause the loss of 600,000 barrels per month in jet fuel demand. That's on top of the 700,000 barrels per month Rystad previously estimated due to the COVID-19 pandemic.
Brent crude, the global benchmark, plunged 7% Thursday to $33.30 a barrel after Trump announced the travel restrictions. U.S. crude oil plunged another 6% to $31 a barrel. It earlier dropped to as low as $30.02 per barrel.
"The move is unprecedented so the full fuel demand impact is largely unknown," said Ryan Fitzmaurice, an energy strategist at Rabobank. "This is on top of the very public OPEC+ skirmish that has oil producers opening the proverbial faucets in an effort to flood the market."
The plunge in oil prices caused by a spike in production and the flight away from equities in global stock markets is fueling talk of an impending global economic recession.
The danger of a recession rose Thursday when the Dow Jones Industrial Average closed 2,352.60 points lower, or 9.99%, at 21,200.62. The massive plunge was the Dow's worst drop since the record-setting "Black Monday" market crash of 1987 when it collapsed by more than 22%.
On Thursday, the S&P 500 plummeted 9.5% to 2,480.64, joining the Dow in the bear market territory. It also had its worst day since 1987 and is now down a quarter this year in only 16 trading sessions. The energy sector of the S&P 500 plunged 10% Thursday.
The tech-heavy NASDAQ Composite closed 9.4% lower at 7,201.80. Black Thursday is now being called the day the 11 year-long bull market run officially died. Oil firms are in deep trouble.
ExxonMobil and Chevron lost about one-fifth of their value this week. Occidental Petroleum lost more than half its value this week. Continental Resources is down over 40%.
Analysts' said Wall Street's historic drop confirms investors in their perception of the Trump administration's plans to contain COVID-19 are a haphazard mess that do nothing to restore consumer confidence and spending.
"The crux of the angst investors are feeling as the coronavirus spreads surround what might happen to consumer spending," wrote Scott Wren, senior global market strategist at Wells Fargo Investment Institute.
"Consumers sitting at home and not out spending money because they fear catching the coronavirus is the ultimate negative outcome. It has been the U.S. consumer who has been driving the recovery bus during this long expansion."
