Oil prices fell to lowest level in 18 years amid coronavirus pandemic

The prices of oil have fallen to the lowest level in 18 years as demand for crude oil has decreased after coronavirus pandemic.

International news agency BBC reported that Brent crude fell to $23.03 a barrel at one point on Monday morning, its lowest level since November 2002.

Meanwhile, the price of US West Texas Intermediate (WTI) fell below $20 a barrel and close to an 18-year low.

Oil prices have decreased by more than half during the past month as companies have closed production.

A price war had also started earlier this month between Russia and Saudi Arabia with a decrease in demand.

This began when Saudi Arabia failed to convince Russia to back production cuts that had been agreed with the other members of the Opec oil producers’ group, BBC reported. 

However, an analyst said a collapse in demand from the measures taken to counter the spread of coronavirus was now the main factor.

The decision came as refineries around the world are processing less crude oil with transport demand hammered by grounded airlines and fewer cars on the roads as countries lockdown commerce to fight the coronavirus.

“Oil prices failed to keep pace, with growing (coronavirus) lock-down measures and reports that this could drive global demand down 20%, potentially pushing the world to run out of storage capacity,” Morgan Stanley analyst Devin McDermott said in a research note, citing a forecast by the Paris-based International Energy Agency.

Shale oil producers in the US have been particularly hard hit by the slump in prices since early March with calls growing for the US to suspend royalty payment fees from drillers and to buy more oil to fill the US Strategic Petroleum Reserve, or have stated such as Texas restrict production, McDermott said. The US is now the world’s top oil producer.

“Since the 1930s, states have had the authority to limit oil and gas production to support oil prices. Though this practice is not widely used today, both federal and state regulators still can place restrictions on production levels,” McDermott said.

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