Oil sinks to lowest since 2003 on fallout from virus

Oil traded briefly below its lowest settlement price in almost 17 years as the coronavirus pandemic threatens to bring the global economy to a standstill, battering demand just as supply explodes.

Futures in New York fell as much as 3.1 per cent to US$26.11 a barrel, which would be the lowest close since May 2003 if prices settle at that level.

The last time crude traded near this level was when the severe acute respiratory syndrome hit Asia.

Oil clawed back some of its initial losses, but remains about 17 per cent weaker this week in the most volatile trading on record.

While policymakers around the world take unprecedented steps to shore up their economies from the fallout of the virus, the meltdown in crude demand and concurrent supply free-for-all by the world's biggest producers continue to pull prices down.

"I don't think we have hit peak demand devastation yet," said Mr Stephen Innes, Asia-Pacific market strategist at AxiCorp, who predicts oil may fall to US$18-US$20 a barrel.

"If cases exponentially increase, especially in the US, it's going to spook the hell out of oil traders."

The market is finding little succour in global efforts to stem the economic fallout. The United States Federal Reserve on Tuesday announced the restart of a financial crisis-era programme in an effort to stem the economic impact from the virus.

While US stocks rebounded from the biggest rout since 1987 on the plan, oil continued its slide as Saudi Arabia signalled its intention to ship a record 10 million barrels a day next month.

West Texas Intermediate for April delivery dropped 71 US cents to US$26.24 a barrel on the New York Mercantile Exchange as of 8.04am in London. Brent crude fell 35 US cents to US$28.38 on the ICE Futures Europe exchange after slumping 4.4 per cent on Tuesday.

US petrol prices recovered some ground after the biggest daily drop on Monday since 2005. The motor fuel was up 1.4 per cent at 72.13 US cents a gallon yesterday.

The supply-and-demand shocks have hammered Wall Street's outlook for oil. Goldman Sachs Group said consumption is down by eight million barrels a day, and cut its Brent forecast for the second quarter to US$20 a barrel.

Standard Chartered Bank predicted that the low for the global benchmark crude is likely to be well below US$20 next quarter, while Mizuho Securities warned that prices could go negative as Russia and Saudi Arabia flood the market.

The rout amid ruthless competition between exporters has forced Iraq to urge the Organisation of Petroleum Exporting Countries (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 rebalancing the global oil market as a massive glut emerges, according to a delegate.

BLOOMBERG