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Oil Price Drops Below $30 as Coronavirus Forces Reduced Demand

The price of oil is easily the most talked about the news after the coronavirus pandemic. Oil, which has relatively maintained a significantly healthy price range for a while now, crashed terribly last week. Saudi Arabia deliberately cut down on the price of oil by 30% in response to Russia disagreeing to reduce its production volume. Since then, the oil market has been hanging in the balance with fears that things might get worse. Those fears have now come to fruition as the price of oil has crashed lower again.

Oil Price Crashes Below $30

The oil price has now plunged by more than 8%, worrying investors as its forecast is now quite bearish. The plunge has renewed fears of a global recession amid the current problem with the coronavirus. Specifically, the U.S. West Texas Intermediate crude lost 8.6%, pushing the price down to $28.99 per barrel. The international Brent crude benchmark crash is worse at 10.9%, leaving a barrel at $30.13. This is the first time Brent is dropping this low, in the last four years.

The Trump administration is, however, scuttling to keep things as balanced as possible. Speaking to reporters at the White House on Friday, President Donald Trump said:

“Based on the prices of oil, I’ve instructed the Secretary of Energy to purchase, at a very good price, large quantities of crude oil for storage in the U.S. strategic reserve. We’re going to fill it right up to the top.”

Price Could Slide Further

Apart from the oil war started by Saudi Arabia, oil is facing another serious adversary. Amid the coronavirus, oil demand has plunged quite terribly. Several restrictions all over the world have directly impacted the number of travelers usually up and about. Several airlines are already shutting down as they are seeing less traffic. Oil is just not in as much demand as it normally is.

According to the head of oil markets at Rystad Energy Bjoernar Tonhaugen, the worst is yet to come.

“Oil prices have reacted extremely negatively and we believe…that we have not seen the bottom of the oil price just yet. The potential loss of demand in March-April may dwarf anything the world has ever seen, just when OPEC+ producers open the floodgates of new supply to the market.”

Even as the Trump administration tries to salvage the situation, not everyone is bullish. Trump says that buying large quantities will not only save taxpayers billions of dollars but also help the country’s oil industry achieve “energy independence.” American multinational financial services company Goldman Sachs says that the U.S.’ decision to buy oil in large quantities will not do much for the price of oil. The firm says it will be “insufficient to reverse the increasingly likely risk that prices” still plunge.

Oil Price Drops Below $30 as Coronavirus Forces Reduced Demand