Oil Slumps as Price War Bites

Oil fell on Monday as an emergency rate cut by the US Federal Reserve failed to soothe global financial markets panicked by the rapid spread of the coronavirus, while a price war between top producers added to a growing supply glut.
Brent crude fell $2.07 to $31.78 a barrel, extending last week’s plunge of 25%, which was the largest weekly fall since 2008, CNBC reported.
The front-month price opened at a high of $35.84 but slipped to a low of $31.63.
US crude was at $30.35, down $1.38 after slipping below $30 earlier in the session, losing ground despite US President Donald Trump’s pledge to fill strategic petroleum reserves (SPR) in the world’s largest oil consumer “to the top”.
“While helpful on the margin, such (SPR) policy pales in comparison to a coronavirus plagued market that is measured in months or a price war that is expected to last several quarters or longer,” RBC Capital Markets analyst Michael Tran said.
With current SPR stockpiles at 634 million barrels, or 80 million barrels less than a nameplate SPR capacity of 714 million barrels, the government buying would clean up only about 20 days of a global overhang that RBC estimates at an imbalance of 4 million bpd, Tran said.
The US Fed slashed interest rates to near zero on Sunday in its second emergency cut this month, and said it would expand its balance sheet by at least $700 billion in coming weeks in a bid to ease tension in financial markets.
Earlier this month, the Organization of the Petroleum Countries (OPEC) and Russia failed to extend a production cut agreement that has been supporting prices since 2016.