Adedapo Adesanya
By Adedapo Adesanya
Oil prices fell more than 10 percent on Monday, opening the week further bearish despite emergency stimulus by the United States Federal Reserve that was meant to ease the hit on the economy.
Brent crude dropped 11.37 percent or $4.03 to trade at $31.44 per barrel, while the US West Texas Intermediate (WTI) crude fell by 9.05 percent equivalent to $2.87 to settle at $28.86 per barrel after it fell below $30 per barrel at midday.
The Federal Reserve on Sunday slashed its benchmark interest rate to zero and implemented a bond-buying program, known as quantitative easing (QE), of at least $700 billion in an effort to lessen the expected blow on the US economy from the coronavirus.
The new round of QE will consist of open-ended purchases of $500 billion of treasury securities and $200 billion of agency mortgage-backed securities but did not for the oil markets, as investors see this as not being able to sustain the market in the long run.
Oil, which plunged last week after Russia and Saudi Arabia began a global crude price war following the breakdown of talks on production cuts early this month, has continued to take a turn down as coronavirus cases continue to surge with its presence now in 163 countries.
Bringing about problems in both supply and demand, oil continues to see drop in demand as travel restrictions are not making companies demand for oil, while increased production from Saudi Arabia, UAE, and Russia among others are flooding the market with enough supply.
On the concerns of oversupply, oil could come to 800 million to 1.3 billion barrels – almost triple of what existed in late 2015 to early 2016, when the Organization of the Petroleum Exporting Countries (OPEC+) pumped more oil to combat the growing US shale industry.
An OPEC and non-OPEC technical meeting planned for Wednesday in Vienna has been called off as attempts to mediate between Saudi Arabia and Russia made no progress, and this could further compound problems this week as coronavirus rages on.
The COVID-19 outbreak, which has infected close to 180,000 people and killed around 6,700 people already has caused oil prices to plummet by 50 percent this year. Many forecasters have lowered estimates on crude demand, as the virus disrupts business activity, travel and daily life.
