Crude prices tumbled on Monday, in step with cratering global equities after an emergency Federal Reserve interest rate cut did nothing to stem the panic among investors triggered by the rapidly spreading coronavirus.
West Texas Intermediate crude for April delivery CL.1, -8.29% on the New York Mercantile Exchange fell $2.34, or 7.2%, to $29.39 a barrel. May Brent crude BRN00, -10.99% dropped $3.16, or more than 9%, to $30.69 a barrel on ICE Futures Europe.
Oil cratered last week after Russia and Saudi Arabia began a global crude price war following the breakdown of talks on production cuts.
“Clearly the oil market has ignored the emergency rate cut from the U.S. Fed over the weekend. The breakdown in the OPEC+ deal could not have come at a worse time, with the market already having to deal with a demand shock,” said Warren Patterson, head of commodities strategy at ING, in a note. “The surge in supply expected from April, along with the demand hit, does mean that the global oil market is set to see a significant surplus over 2Q20, suggesting that this current weakness is likely to persist through 2Q20.”
Last week, WTI fell 23%, while Brent lost 25%—with both marking their biggest weekly percentage declines, based on the front-month contracts, since December 2008, according to Dow Jones Market Data.
On Sunday, the Federal Reserve cut interest rates to nearly zero and said it would buy back $700 million of Treasurys and mortgage-backed securities.
Italy’s COVID-19 cases surged as the U.S. expanded a travel ban to the U.K. and Ireland, Germany partially shut borders, while France went into partial lockdown.
Also stressing oil prices were some bleak numbers out of China. “Analysts had been expecting a 3.0% fall in industrial production, a 2.0% drop in fixed asset investment and a 4.0% contraction in retail sales. Instead the readings came in at -13.5%, -24.5% and -20.5% respectively,” said Connor Campbell, financial analyst at SpreadEx.
Shares of BP BP, -7.44% dropped more than 7% in London, while shares of Exxon Mobil XOM, +2.53% dropped more than 10% in premarket activity as crude prices tumbled.
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