Oil slumps to near 18-year low under $25 on Saudi output threats
INTERNATIONAL – Oil prices plunged below $25 a barrel for the first time in almost 18 years after Saudi Arabia made another shock-and-awe attack in its price war with Russia, vowing to keep production at a record high “over the coming months”.
Futures in New York fell as much as 9.1 percent to $24.49 a barrel, the lowest since June 2002. The last time crude traded near that level was when severe acute respiratory syndrome (SARS) hit Asia. The price war between key producers continued to deepen as Saudi Arabia said it would pump about 12.3 million barrels a day for the coming months.
While policy makers are taking unprecedented steps to buttress economies from the fallout of the virus, the meltdown in crude consumption and the concurrent supply free-for-all by the world’s biggest producers continue to pull prices down.
In a statement, the Saudi Ministry of Energy said it had “directed Saudi Aramco to continue to supply crude oil at a level of 12.3 million barrels a day over the coming months”.
The market is finding little succor in global efforts to stem the economic fallout. The US Federal Reserve on Tuesday announced the restart of a financial crisis-era program to stem the impact from the virus.
The supply and demand shocks have hammered Wall Street’s outlook for oil. Goldman Sachs Group said consumption is down by 8 million barrels a day and cut its Brent forecast for the second quarter to $20 a barrel. Standard Chartered predicted the low for the benchmark crude will probably be well below that level next quarter, while Mizuho Securities warned prices could go negative as Russia and Saudi Arabia flood the market.
The rout amid ruthless competition between exporters has prompted Iraq to urge OPEC and its allies to regroup for negotiations. Before OPEC+ talks collapsed earlier this month, Iraq had routinely disregarded the supply cutbacks it had promised. Now the producer has asked the cartel to hold a meeting to consider steps for re-balancing the global oil market, according to a delegate.Bloomberg