Oil Prices Tumble as Coronavirus Hammers Global Demand, Saudi Production Pledge Opens Crude Taps

U.S. oil prices have fallen for five consecutive weeks, and have plunged more than 66% since the start of the year, taking gas below $2 a gallon across much of the country.

Global oil prices extended declines Friday, marking the fifth consecutive week of crude losses, as investors continue to factor in a huge slump in demand from the coronavirus pandemic and the ongoing dispute between Russia and Saudi Arabia.

A Saudi Arabia oil ministry official told Reuters Friday that there are no current discussions with respect to a joint agreement with Russia to balance global crude markets following the collapse of a three-year deal to limit production earlier this month. The comments followed more data from both the U.S. and China this week that suggest global demand is unlikely to recover in the near term as coronavirus infections accelerate and travel restrictions and business lockdowns remain in place.

"It does seem that the only thing that will bring OPEC+ back to discuss stabilising the market will be lower prices. Therefore we are likely to see more pain in the near term," said ING's head of commodity strategy Warren Patterson.

"In the absence of an emergency meeting, the market will likely have to wait until the scheduled OPEC meeting in June for some sort of action," he added. "Although by that stage it would be too late, with a significant surplus already built over much of 2Q20."." 

Brent crude futures contracts for May delivery, the global benchmark, were last seen $1.79 lower from their Thursday close in New York and trading at $24.55 per barrel, while WTI contracts for the same month were marked $1.22 lower at $21.38 per barrel.

Crude prices were also pressured by a report that suggested the U.S. Energy Department is looking for money from its existing budget to buy 77 million barrels of oil to fill the nation's strategic petroleum reserve after the funding was not included in yesterday's $2.2 trillion coronavirus stimulus plan.

President Donald Trump had instructed the Energy Department to "purchase, at a very good price, large quantities of crude oil for storage in the U.S. strategic reserve", telling reporters at the White House he was going to "fill it right to the top".

With the ongoing collapse in crude, consumer advocate GasBuddy is now forecasting June pump prices of around $2.01 per gallon, more than $1.70 lower than its prior forecast and the lowest in at least four years.

Earlier this week, Chevron Corp  (CVX) - Get Report slashed its capital spending plans, and halted its share buyback program, while warning of a 'material' coronavirus impact on its 2020 earnings, amid the global crude market meltdown.

Chevron said it will lower its 2020 spending plans by around 20%, or $4 billion, and expects reduced production from its shale deposits in the Permian Basin. It's also freezing its share buyback program, which has intended to purchase $4.25 billion in stock between now and the end of the year.

Oil prices suffered the biggest decline on record last week pulling U.S. crude prices to the lowest levels in 18 years, as travel restrictions, manufacturing sector shut-downs and a looming global recession hammer demand prospects.

Saudi Arabia, the world's second-largest producer behind the United States, is also set to pump a record 12.3 million barrels of crude each day, starting next month, following the collapse of its output limit agreement with OPEC cartel members and Russia earlier this month in Vienna.