Traders Flee Risky Assets, Cause 18 Year Price Lows For Crude

Meanwhile, U.S. producers scramble to weather the storm: File Image/PixaBay

With fear of the coronavirus arguably now far more of a threat than the virus itself, and with Saudi Arabia maintaining its resolve to pump all out despite market collapse, oil prices on Wednesday continued their downward spiral, this time reaching 18 year lows.

West Texas Intermediate incurred the severest drop: it fell $6.58, or 24.4 percent, to settle at $20.37 per barrel; Brent settled down $3.85 at $24.88 per barrel.

Ignoring pleas to halt its price war with Russia and help balance the ailing market, the Saudis reiterated their plans to maintain record production at more than 12 million barrels per day (bpd); as a result, traders believe the increase will limit U.S. exports in coming weeks and cause storage to fill rapidly.

Eurasia Group on Wednesday stated that "Saudi policy will now revolve around inflicting pain on other producers over the short term," however it added that "Extensive pain from the oil price shock will accumulate over the course of 2020 and create the necessary conditions for negotiations, compromise, and probably a new production restraint agreement."

As for schools and businesses closing across North America in the hopes this will provoke a dramatic recovery from the virus as has been witnessed in its origin country of China, this has caused investors overall - who are jittery at the best of times - to flee risky assets.

Gene McGillian, vice president of research at Tradition Energy, observed, "There are fears of an economic collapse because of what this virus represents, globally."

He added with regards to crude trading, "The market is cascading; it's trying to search for a bottom and it doesn't seem able to find one."

Meanwhile, U.S. shale producers are pulling out the stops to weather the storm as best as possible: having already temporarily laid off thousands of workers, they are now slashing executive pay - in the case of Parsley Energy Inc., by 50 percent.

Matt Gallagher, chief executive of Parsley, said suppliers and employees need to know "That we are in it together."

As for the latest news regarding industry's efforts to cope with the surge of excess inventory, Royal Dutch Shell has booked a supertanker to store 2 million barrels of oil at sea.

All but ignored in the doomsday coverage of the coronavirus by the mainstream media are reports that not only is progress being made in a vaccine for the virus, but also treatments for those infected and who are suffering the flu-like symptoms.