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The benchmark U.S. oil price plunged to its lowest level in 18 years early on Wednesday and Brent Crude dipped below $30 a barrel for a four-year-low, as the worsening impact of the coronavirus chaos continues to roil the markets despite massive stimulus from major central banks.
At 12:08 a.m. EDT on Wednesday, WTI Crude had plunged to $23.56, down 13.79 percent on the day and the lowest level since 2003. Brent Crude was trading down 7.93 percent at $28.00, the lowest price since the beginning of 2016.
With Brent plunging to multi-year lows, the price of the OPEC basket of thirteen crudes stood at $30.36 a barrel on Tuesday, compared with $30.63 on Monday, according to OPEC Secretariat calculations.
At those prices, no OPEC producer can balance their budget and have enough oil revenues to cushion the blow from the looming global recession.
The last time Brent Crude was this low was in early 2016 when a glut weighed heavily on oil prices.
This time around, the glut will be much larger than the 2016 record oversupply, by two to four times, as per estimates from IHS Markit.
The largest-ever glut is coming as oil demand is slumping due to the coronavirus pandemic and former allies Saudi Arabia and Russia promising to flood the market with oil as they are in an all-out price war for market share.
The Saudi Arabia-Russia feud is unfolding while the Covid-19 pandemic is wiping out millions of barrels per day of oil demand around the world as a growing number of countries are going into lockdown, closing borders, and banning flights from the most heavily impacted countries.
The markets are in panic mode and no central bank stimulus has managed to turn around sentiment as investors and speculators fear that the larger the stimulus, the worse the impact on economies authorities expect.
“The demand picture continues to deteriorate as more countries implement shutdowns and put in place travel restrictions which have seen airlines cut capacity. Meanwhile, the pickup in oil supply from April following the breakdown of OPEC+ talks does mean that these weak prices are likely to linger for quite a while longer,” ING strategists said on Wednesday.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.