West Texas Intermediate crude for April slumped as much as 34% to $27.34 a barrel on the New York Mercantile Exchange. The U.S. benchmark settled at $31.13.
The shocks in supply and demand have also reverberated across time-spreads, options and volatility. Brent’s three-month price structure widened sharply as oil for prompt delivery collapsed against later shipments.
It moved deeper into contango, a sign of bearishness and oversupply, making it profitable for physical traders to buy crude and put it into storage, either in onshore tank farms or at sea on tankers.
“Markets are bracing for oil prices in the 20s,” said Ellen Wald, president of Transversal Consulting and a nonresident fellow at the Atlantic Council’s Global Energy Center. “I don’t think production can win this war. There’s not enough demand for it. That’s the difference between 2014 and today.”
Saudi Arabia slashed its official prices by the most in at least 20 years over the weekend and privately told some market participants it could raise output by a record 12 million barrels a day. Russia’s state oil company Rosneft PJSC is planning to lift oil production and could start ramping up output on April 1 and add 300,000 barrels a day within weeks of that date.
Energy Minister Alexander Novak said the current state of global oil markets is within Moscow’s forecast range, noting it will make efforts to ensure the nation’s oil sector remains competitive, according to a statement on the government website.
“No one thought this would be a probable outcome,” said Ian Nieboer, managing director at RS Energy Group, now part of Enverus. “There’s an aggressive threat to demand and its amplified by a flood of barrels into markets that don’t need it. It’s hard to imagine where we go from here.”
Amid the collapse in the alliance, Nigeria’s Minister of State for Petroleum said the country would boost oil output and has the capacity to increase output to more than 2 million barrels a day.
--With assistance from Javier Blas, Anthony DiPaola, Ramsey Al-Rikabi and Alexander Kwiatkowski.
This article was provided by Bloomberg News.