(Bloomberg) -- Oil deepened losses, dropping to the lowest level since 2016 as the coronavirus pandemic threatens to bring the global economy to a standstill, battering fuel demand at a time when crude supply is surging.
WTI futures fell 6% in New York on Tuesday as investors grappled with the possibility of a virus-induced global recession. The Federal Reserve announced the restart of a financial crisis-era program in an effort to stem the virus's economic impact. U.S. stocks rebounded from the biggest rout since 1987 on the stimulus plan, but oil continued to reel from supply and demand shocks. Saudi Arabia plans to ship a record 10 million barrels a day in April.
“These are dramatic and unheard-of disruptions,” said Pavel Molchanov, energy research analyst at Raymond James & Associates Inc. “Lockdowns around the world alone would be enough to trigger a bear market for oil. Add in the collapse of OPEC+, those two create an unbelievably toxic combination. This crisis is shaping up to be the worst shock to global demand in modern history.”
Oil markets are coping with an unprecedented upheaval in demand as the pandemic wreaks havoc on travel amid widening lockdowns.
The slump in demand is coinciding with a flood of supply as Saudi Arabia and Russia engage in a price war for market share. The instability has prompted Iraq to ask OPEC to hold a meeting of the Joint Ministerial Monitoring Committee to consider steps for re-balancing the oil global market.
The supply and demand shocks have dimmed Wall Street's outlook for oil. Goldman Sachs Group Inc. said oil consumption is down by 8 million barrels a day and cut its Brent forecast for the second quarter to $20 a barrel. Meanwhile, Mizuho Securities Llc. warns crude prices could go negative as Moscow and Riyadh flood the market with supply.
See also: American Senators Urge Saudis to Take Action to Calm Oil Market
West Texas Intermediate for April delivery fell $1.75 or 6.1%, to settle at $26.95 a barrel on the New York Mercantile Exchange. Brent lost $1.32 to end the session at $28.73 a barrel on the ICE Futures Europe exchange.
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