By Adedapo Adesanya
Energy analysts have said oil will remain in the bearish region this after prices crashed last week as a result of the Saudi-Russia oil price war, which caused global panic during the week.
Though prices later rose, it was very insignificant as cases of the coronavirus pandemic escalated outside China, where it originated from. Europe was worse hit last week.
Over 25 percent was lost by crude oil last week, one of its worst in in 30 years and this week, despite the further cut in interest rates by United States’ Federal Reserve, prices have remained in red.
On Sunday, March 15, the US Fed issued another emergency cut, with its benchmark interest rate nearing zero so as to support the ailing economy, but this has not helped even as the Bank of England, Reserve Bank of Australia, and the Bank of China have all cut interest rates.
According to analysts, the major reason why prices have remained low is because of the fear being nursed by investors and traders, who believe that market cannot hold on for long despite these interventions. They fear that the virus will continue to keep people away from economic activities.
The Covid-19 has continued to affect economic activities across Europe, Asia, and the United States. Over 6,500 people have died from the disease,while several others have been infected. This has led to stricter preventive measures being taken by governments, including announcing travel restrictions, postponement of events, especially sporting events where several billions of dollars are generated.
As a result of this, US crude exports are set to plunge by about one million barrels per day in April and May as Saudi Arabia floods the market with discounted oil.
Saudi Arabia has started selling its oil for as little as $25 per barrel and already placed its cargoes on the seas with about 12 million barrels of crude to the US Gulf Coast and more to other parts of the world, as it escalates its fight with Russia for global market share.
This is the aftermath of the failure between the Organization of the Petroleum Countries (OPEC) and Russia earlier this month to extend a production cut agreement which has been supporting prices since 2016.
Experts see a challenging week for major futures which are currently trading at their lowest levels in five years. As at the time of writing, the Brent Crude on Monday was down $2.30 or 6.5 percent around the $33 per barrel mark while the West Texas Intermediate Crude was down $1.59 or 5.01 percent to trade at $30.17 per barrel.
There are no positive expectations for oil at the moment but there in the case of any unexpected event that may spur any recovery this week, it will be incremental and may return to their prices before the oil crash last week around the $40 – $45 per barrel.
