The markets are also being pressured by the threat of a flood of cheap oil after Saudi Arabia announced earlier in the week that it would increase production on April 1 and lower prices substantially.
The global benchmark was trading at USD34.07 for each barrel at 0550 GMT for a 4.8 percent drop, after it ended Wednesday at USD35.79 a barrel with a decrease of 3.7 percent.
Brent crude LCOc1 was down $2.57, or 7.2%, at $33.22 a barrel while U.S. West Texas Intermediate Texas crude CLc1 was down $1.48, or 4.5%, at $31.50.
Oil prices fell more than 5% on Thursday after U.S. President Donald Trump unexpectedly announced restrictions on travel from Europe, in an attempt to halt the spread of coronavirus after the World Health Organization described the outbreak as a pandemic. Brent was trading at roughly $36 a barrel in London, and WTI trading at about $33/Bbl in NY.
Thus, they feel that it is "probable" that they will have to reduce their estimates even further if the current situation persists, and then they could actually forecast a drop in annual global demand for crude, the first since 2009 and a scenario predicted by the International Energy Agency on Monday.
Russian Federation and its ex-soviet neighbor failed to reach a new oil supply deal in January, meaning that Minsk started to look for Urals replacement. They suffered their biggest one-day declines since the 1991 Gulf War on Monday after Saudi Arabia launched a price war.
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The six-month Brent (NYSEARCA:BNO) contango spread from May to November widened to as low as $6.40/bbl, a level not seen since February 2015.
Eleven non-OPEC oil-producing countries, led by Russian Federation, have agreed to extend an agreement struck in 2016 with OPEC on reducing oil production by 1.2 million barrels per day until March 2020 as a way to stop the slide in pricing. Market and market forces will regulate it fairly quickly.
"They're both getting ready to fight a pretty aggressive price war".
From both political as well as business quarters, the demand for a cut in petrol and diesel prices has been raised after crude oil prices tanked following the failure of OPEC and Russian Federation to strike a deal on a production cut to factor in lower future demand due to the Covid-19 global pandemic.
This week's oil price rout had become inevitable and cutting output has ceased to make sense because it is unclear how deep the impact of the coronavirus on demand will be, Russia's deputy energy minister said in an interview with Reuters on Wednesday (11 March).
As a fast-growing oil demand center, Asia stands to lose most over the next decade or two if the world's oil production capacity shrinks much faster than the growth in alternative sources of energy.