US crude oil on Monday broke below $20 a barrel for the first time 18 years before settling down nearly 7 percent on the day as demand destruction from the novel coronavirus (COVID-19) pandemic continued to rip through energy markets
NEW YORK (Pakistan Point News / Sputnik - 31st March, 2020) US crude oil on Monday broke below $20 a barrel for the first time 18 years before settling down nearly 7 percent on the day as demand destruction from the novel coronavirus (COVID-19) pandemic continued to rip through energy markets.
West Texas Intermediate (WTI), the New York-traded benchmark for US crude, settled down $1.42, or 6.6 percent, at $20.09 per barrel, its lowest since February 2002. WTI earlier hit an 18-year low of $19.27.
London-traded Brent, the global benchmark for oil, closed down $2.17, or 8.7 percent, at $22.76.
Oil's latest tumble came as Goldman Sachs, the US investment bank regarded as one of Wall Street's most influential voices in oil trading, estimated that crude demand for this week will fall by 26 million barrels per day or 25 percent below norm.
"With social distancing measures now impacting 92 percent of global GDP, the ultimate magnitude of these shut-ins which is still unknown will likely permanently alter the energy industry and its geopolitics, restrict demand as economic activity normalizes and shift the debate around climate change," Goldman Sachs said in a note on oil.
"Not only is this the largest economic shock of our lifetimes, but carbon-based industries like oil sit in the cross-hairs as they have historically served as the cornerstone of social interactions and globalization, the prevention of which are the main defense against the virus," the investment bank added.
Both WTI and Brent are down about 60 percent or more on the year amid a perfect storm of demand destruction from the COVID-19 pandemic and ill-timed production hikes by Saudi Arabia, which is trying to flood the market with its own cheap crude to wrest as much market share as possible from Russian and US competitors.
US crude is particularly impacted by worries that Riyadh's strategy will cause many American oil drillers into bankruptcy, given that their operating costs are typically higher than those of their Saudi and Russian counterparts.
WTI has also been impacted by the Trump administration's decision on Sunday to extend the nation's shutdown of non-essential businesses till the end of April at least, after initially mulling a reopen by Easter, which falls on April 19.
