Brent crude LCOc1 was down 47 cents, or 1.4%, at $32.75 a barrel by 0317 GMT after falling more than 7% on Thursday. For the week, Brent is set to fall nearly 28%, the biggest weekly decline since the week of Jan. 18, 1991, when it fell 29% at the outbreak of the first Gulf War.
U.S. West Texas Intermediate (WTI) crude CLc1 was down 54 cents, or 1.7%, at $30.96 after falling more than $1 earlier. The contract fell 4.5% in the previous session. WTI is set to drop 25% this week, the most since the week of Dec. 19, 2008, when it fell 27% at the height of the Global Financial Crisis.
As travel bans, cancelled events and other economic disruptions eat into crude demand, major oil producers are announcing plans to add more crude to an oversupplied market.
A flood of low-priced oil from Saudi Arabia, the world’s largest exporter, and the United Arab Emirates is intensifying the pressure on prices after the collapse of a price supporting agreement with Russia last week.
Russia, the world’s second-largest producer, does not appear willing to return to the agreement with the Organization of the Petroleum Exporting Countries (OPEC).
Domestic oil producers met with Russian Energy Minister Alexander Novak on Thursday but did not discuss returning to the deal, with the head of Gazprom Neft saying they plan to raise output in April.
“Both Russia and the Saudis are digging in deeper,” said Stratfor oil analyst Greg Priddy.
Oil prices were also impacted by record declines in equity markets with Japan’s Nikkei 225 falling by 10% on Friday after U.S. markets fell by the most since Black Monday in 1987 on Thursday.
U.S. President Donald Trump announced a ban on travel to the United States from Europe that sent the markets swooning as everything from sporting events to weddings were cancelled across many parts of the world with the coronavirus spreading to more countries.
“With the coronavirus triggering the first global oil demand drop in years, the surge of Saudi Arabian and Russian oil production could lead to a supply overhang of 4 million barrels per day,” Eurasia Group said.
Four million barrels is about 4% of daily global consumption before the coronavirus outbreak that started in China.
U.S. energy historian Daniel Yergin said it may be some time before oil markets are relieved as the coronavirus courses through the world and disrupts daily life while Saudi Arabia and Russia try to flood the market.
However, the price slump may be doing the work needed to reduce supply. Energy companies in the U.S., the world biggest crude producer, are preparing to cut investment and drilling plans because of the plunging prices.
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