Oil prices fell sharply on Monday, with US crude briefly dropping below $20 and Brent hitting its lowest level in 18 years, on heightened fears that the global coronavirus shutdown could last months and demand for fuel could decline further.
Brent crude, the international benchmark for oil prices, was down $2.08, or 8.3%, at $22.85 by 1127 GMT, after earlier dropping to $22.58, the lowest since November 2002.
US West Texas Intermediate (WTI) crude fell $1.11, or 5.2%, to $20.40. Earlier in the session, WTI fell as low as $19.92.
The price of oil is now so low that it is becoming unprofitable for many oil firms to remain active, analysts said, and higher cost producers will have no choice but to shut production, especially since storage capacities are almost full.
“Global oil demand is evaporating on the back of COVID-19-related travel restrictions and social distancing measures,” said UBS oil analyst Giovanni Staunovo.
“In the near term, oil prices may need to trade lower into the cash cost curve to trigger production shut-ins to start to prevent tank tops to be reached,” he added.
Rystad Energy’s head of oil markets, Bjornar Tonhaugen, said: “The oil market supply chains are broken due to the unbelievably large losses in oil demand, forcing all available alternatives of supply chain adjustments to take place during April and May,” including cutting refinery runs and increasing onshore or offshore storage.