Oil falls 24% in 3rd worst day on record, sinks to more than 18-year low

Published Wed, Mar 18 Pippa Stevens  cnbc.com

Oil dropped 24% to a more than 18-year low on Wednesday as the coronavirus pandemic continues to sap demand for crude and as rising worries about a global recession lead to fears of longer-term demand destruction.

U.S. West Texas Intermediate crude fell 24.4%, or $6.58, to $20.37 per barrel, its lowest level since Feb. 2002. It was WTI’s third worst day on record.

International benchmark Brent crude shed 14.1%, or $4.07, to trade at $24.67, its lowest level since 2003.

Oil is getting hit on both the supply and demand side. A slowdown in worldwide travel and business activity is weighing on demand, just as powerhouse producers Saudi Arabia and Russia prepare to ramp up production.

“The oil market is about to flood with surplus barrels,” Bank of America said in a note to clients Wednesday.

How low can prices go?

As demand grinds to a halt, the OPEC+ production cuts currently in place expire at the end of the month, meaning nations will soon be allowed to pump as much as they please.

“With each day there seems to be yet another trapdoor lying beneath oil prices, and we expect to see prices continue to roil until a cost equilibrium is reached and production is shut in,” said Rystad Energy analyst Louise Dickson.

“This is the most dismal oil demand picture we have witnessed in a long time with a simultaneous collapse in jet fuel, gasoline, shipping fuel, petrochemicals, and oil used for power generation.”

WTI and Brent crude are on pace for their worst month ever, each down 45%.

On Tuesday, Goldman Sachs slashed its oil forecast for the second quarter, now seeing WTI and Brent averaging $20 per barrel. The firm believes oil use has fallen by 8 million barrels per day. “Demand losses across the complex are now unprecedented,” Jeffrey Currie, the firm’s global head of commodities research, said in a note to clients.

Unlike prior periods of economic turmoil, including the financial crisis in 2008, the long-term impact of coronavirus is still very much unknown. With more and more market watchers saying a recession looks likely, oil prices could have much further to fall.

“Looking ahead, the path of least resistance is decidedly lower right now and the lower-for-longer dynamic appears to be one that is here to stay for a while, given the clearly bearish fundamentals pointing to a likely longstanding surplus in the global oil markets,” said Tom Essaye, co-founder of The Sevens Report.

OPEC+ talks unwind

After talks between OPEC and its allies, known as OPEC+, broke down earlier this month, Saudi Arabia announced plans to increase its daily production to a record 12.3 million bpd in April. By comparison, the kingdom pumped roughly 9.7 million bpd in February. Russia is among the other OPEC+ nations that has said it, too, could ramp up production.

“Saudi Arabia has become a market arsonist, adding as much fuel as possible to the selling fire, in the form of a maximized capacity output scheme,” Again Capital’s John Kilduff said. “Prices are attempting to find a clearing level or bottom, which I sense will be around the $18.00 per barrel level for WTI,” he added.

As oil prices continue to slide, OPEC-member Iraq on Tuesday urged the 14-member cartel and its allies to hold an emergency meeting, according to Reuters.

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Per Fox, it may go to zero.  It will not go there but most companies will go bankrupt. No need to post these articles—we all know about it.


Don't take it personally although I know that's hard.  I don't make the news, I just post it.  I am hoping that this lasts only long enough to kill off the zombies and results in a healthier price environment for those left standing going forward.

I don’t take it personally, but this is GHS.  Not a site that just links every other post on the internet.  But maybe that is what it has become.  I personally think the change is not for the better.  

Each member is free to post whatever they find of interest and care to share and discuss.  Just don't look.

I know that.  Just hate to see it has turned into a click site.  Don’t worry, i wont post much any more. 


It's always been that way.  Nothing has changed except that most of the news is a downer.

Skip, the truth hurts. You have always been about the cold assessment. During the Brown Dense fever, you reported the truth. During the salad days, you mentioned the coming realities of shale play. You always linked reputable sources. Keep going. Some are interested. After all, it has been boom and bust around here since The Rodessa Boom and Pine Island. Some folks love to be cocky when times are sweet, but become whine buckets and sour pusses when "they ain't all that."

Thanks, Aaron.  Out of respect for Jay, I am not posting the price of crude again until next week.  Consider it a period of mourning.

Skip can post what he wants and I won't complain.   I just find it redundant.  Here in Houston, we all know the score and it is not good.  And it is not just for the oil biz.  Just wait, smaller towns, it is coming to you and it is no fun.


News outlets report that OPEC+ could not come to agreement on cuts. Maybe they got smart and realized they were not the production problem.

Why don't the News people report that OPEC+ declared war on nonmember producers (USA) that have higher production costs than them in order to eliminate the competition?

The Saudis tried this once before aimed at supporting market share and attempting to weaken US energy companies.  Two things happened:  the US upstream companies cut costs and innovated their way to a more competitive cost per barrel and the Saudis found out that the US companies were resilient bolstered by cheap money from Wall Street and private equity.  This time around is different as the easy borrowing days are over and neither Wall Street nor private equity appears to want any more paper.  Not to mention that many of the upstream companies have dug deep debt holes and have been barely scrapping under the previous price range.

Here is the bottom line.  US E&P companies are predominantly "frackers" - unconventional reservoirs, think horizontal wells, hydraulic fracture stimulus, while Russia and Saudi Arabia are producing conventional reservoirs.  Their cost are much less and they are more proximal to the main end users, Europe and Asia.  So OPEC+ and Russia have always held the better hands, they just got tired of the US upstream players bluffing.  They both raise and call.

I have seen several articles claiming that the primary focus is to damage US competition and that's definitely part of the incentive.  All the major oil producing countries are forward looking and the future they see is limited.  The musical chairs game has begun.

I cannot blame them, one bit. If the American system, with corporate backing, can try to disrupt Europe and Russian fuel agreements and commercial projects through sanctions and economic warfare, then all is fair. Some of these damned fracking outfits, and other energy companies, were throwing dollars and sweet benefits to their corporate officers like they weren not leveraged up the ying yang. I know of a couple of them in Houston. Last summer you would have thought they were Daddy Joiner the way they were wearing the ornaments of wealth.



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