Fundamental Comment

Brent crude hits 18-year low on demand, supply shocks

Brent crude hits 18-year low on demand, supply shocks

Oil prices fell to an 18-year low during Monday's trading, as concerns remain over supply and demand for crude, as well as the threat of Saudi-Russian price war by flooding the market with excess supplies.

As of 07:30 GMT, Brent crude reached $23 a barrel, while the lowest level recorded during the session was at $22.74. That is the lowest level since November 2002.

West Texas Intermediate (WTI) crude futures traded at $20.23 per barrel, which is close to the lowest level in 18 years recorded earlier this month.

Pessimism is dominating crude investors as economic activity around the world has stalled as world economies only seek to control the Corona virus.

According to the IMF director Kristalina Georgieva that the world economy is already in recession, owing to the severe damage caused by the Coronavirus.

Moreover, the IEA director Fatih Birol expects oil demand to drop sharply in first quarter due to coronavirus outbreak.

With nearly 3 billion people around the world at home because of Corona, demand for oil could drop by 20 million barrels per day, Fatih Birol said at an online event hosted by the Atlantic Council on Thursday.

Oil prices were also negatively affected by the price war between OPEC and Russia producers, amid increased supplies and price cuts between the two sides, causing expectations of a glut of supply in the market.

An official with the Saudi Energy Ministry said the Kingdom is not holding talks with Russia to balance oil markets, despite growing pressure from Washington to stop the turmoil.

U.S. companies closed 40 oil rigs last week, with a sharp drop in prices that negatively affected the feasibility of shale ore exploration.

Oil meanwhile is being hit from both demand and supply sides, which is yielding in the undergoing price crash.

Regarding Covid-19 latest updates, the number of global infections has risen to more than 723,000 and more than 34,000 deaths.

Meanwhile, the dollar index, which measures the performance of six major currencies against the US dollar, rose 0.45 percent at 98.99.

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