Benchmark oil futures in the U.S. fell at their lowest since early 2002 on the heels of a bleak outlook for this year's record decline in global oil demand and a 12th straight weekly increase in U.S. crude inventories.
Amid global oil producers' attempts to curb output to balance the market in the past weeks, the world is still hounded by a huge demand problem, Tyler Richey, fellow editor at Sevens Report Research, disclosed to Market Watch.
Richey pointed out that until we witness the demand for refined products starting to rebound, leading to increased refinery operations, "it will be hard to make a bullish argument in the near future for oil prices."
Energy shares had suffered the steepest declines after another 18-year fall in oil prices. Global demand for oil is expected to drop by a record amount this year, reports the International Energy Agency.
On the New York Mercantile Exchange, U.S. crude contract reached its lowest price since 2002 on Wednesday, before it recovered to $19.87. Brent crude, used to price international oils, soared 67 cents to $28.36 a barrel in London. It dropped $1.91, or 6.5 percent, to $27.68 in the previous session.
As if the oil industry needed any more support on their continued plunge, the International Monetary Fund has just cut global growth to the lowest since the 1930s.
Based on a Bloomberg report, the IMF forecast that the "Great Lockdown" recession would be the worst in nearly a hundred years, and cautioned that the global economy's contraction and recovery would be deeper than expected if the pandemic continues.
Refiners in the U.S. and elsewhere in the pandemic-affected world are slashing run levels and others have started closing down plants as the fuel supply continues to overtake demand by a rising margin.
According to analysts, the health scare is killing demand, and this may drag on for the next few weeks or months depending on how the authorities "flatten the curve" of the coronavirus infections.
U.S. refineries were processing an average of 12.7 million barrels per day of crude in the past week. This is in contrast to 13.6 million bpd a week earlier, and 14.9 million bpd three weeks ago. Oil exporters will see their growth declining 4.4 percent in 2020 as a result of the crude price collapse, analysts said.
Oil exporters in the Middle East and Central Asia should see their economies contract by almost 4 percent, with Saudi Arabia's gross domestic product dropping by 2.3 percent, the UAE by 3.4 percent and Iraq by 4.4 percent.
