U.S. oil dropped to an 18-year low on Monday as demand continues to evaporate, and as Saudi Arabia and other OPEC+ nations prepare to ramp up production.
With much of the world in lockdown as the coronavirus pandemic rages on, demand for oil has fallen off a cliff. People aren’t travelling and business has slowed, reducing the need for jet fuel and gasoline.
U.S. West Texas Intermediate crude fell 6.6%, or $1.42, to settle at $20.09, its lowest level since February 2002. Earlier in the session the contract shed more than 9% to trade at a session low of $19.27. The contract had briefly traded below the key $20 per barrel mark on March 20, although it was in thin trading on a contract that was set to expire.
International benchmark Brent crude fell 8.7% to settle at $22.76 per barrel, a price last seen in 2002.
The drop-off in demand comes just as the OPEC+ production cuts expire. Beginning April 1 the 14-member cartel and its allies will be able to pump as much oil as they please, and Saudi Arabia is among the nations that has vowed to ramp up its production.
A gas flare burns an oil worker monitors a water tank while loading saltwater from an oil well storage tank near Sidney, Montana.
Daniel Acker | Bloomberg | Getty Images
Given the hit to both supply and demand, analysts are projecting that despite WTI’s 55% slide this month