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Oil prices hit 17-year low as lockdowns, restrictions spread

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LONDON: Oil prices fell for a third session on Wednesday with US crude futures tumbling to a 17-year low as travel and social lockdowns sparked by the coronavirus epidemic knocked the outlook for demand. US crude was down $1.51 cents, or 5.6 per cent, at $25.44 per barrel by 1135 GMT, having earlier fallen to $25.06, its lowest since late April 2003.


The last time oil was trading that low, the United States had invaded Iraq and China had only begun its rise as a major global economic power that propelled the world’s oil consumption to record highs in subsequent years.


Brent crude was trading down 95 cents, or 3.31 per cent, at $27.78 a barrel, after dropping to $27.56, its lowest since early 2016.


“The oil demand collapse from the spreading coronavirus looks increasingly sharp,” Goldman Sachs said in a note forecasting a fall in the price of Brent to as low as $20 in the second quarter, a level not seen since early 2002.


The bank expects a demand contraction of 8 million barrels per day (bpd) by late March and an annual decline in 2020 of 1.1 million bpd, which it said would be the biggest on record.


In efforts to support economies, the world’s richest nations prepared to unleash trillions of dollars of spending to lessen the fallout from the coronavirus outbreak, as well as imposing social restrictions not seen since World War Two.


Rystad Energy projects a year-on-year decrease of 2.8 per cent or a fall of 2.8 million bpd in global oil demand this year. “To put the number into context, last week we projected a decrease of just 600,000 barrels,” Rystad said.


The consultants expect demand in April to fall by 11 million bpd compared with 2019.


The impact on demand is starting to show in official statistics with Japan’s trade bureau saying on Wednesday that crude imports into the world’s third-biggest economy in February were down 9 per cent from a year earlier.


Virgin Australia became the latest airline to shut down its international network with the suspension of all overseas flights, while Australian Prime Minister Scott Morrison warned that the situation could last six months or more. — Reuters


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