- Crude oil price hits $19.88, a new 18-year low for the “black gold”
- Oil guru warns that April is going to be a very difficult month for oil prices amid the collapse in demand
- The coronavirus outbreak may cause the demand to decrease by 20 million barrel a day in April
Crude oil prices have today traded below the $20 mark for the first time since February 2002 as the bears continue to push the price action lower amid the low market prices and coronavirus outbreak.
Fundamental analysis: Oil facing “unprecedented” collapse in demand
Dan Yergin, one of the most recognized oil experts, has warned that the demand for oil could decline by 20 million barrels a day in April on the back of the coronavirus outbreak that has caused travel bans and national lockdowns.
“The breakdown of OPEC+ is only part of the picture. The big thing is the coronavirus and the showdown of much of the world economy,” said Yergin, who is serving as vice chairman of IHS Markit.
Last month, oil prices crashed nearly 50% on the breakdown in talks between the Saudi Arabia-led OPEC and Russia. However, the collapse in Vienna talks may have only triggered a sharp decline in prices, while the key factor is the coronavirus outbreak, says Yergin.
“Cars not on the road, airplanes not in the air, factories not working, people not going to work. We see, in this month of April that’s coming, what could be a 20 million barrel a day decline in oil demand.”
“It’s unprecedented. That’s six times larger than the biggest downturn during the financial crisis period” (in 2008).
Despite the falling demand, major oil producers, such as Saudi Arabia and Russia, said they will increase the daily production to partially offset losses from the low market prices.
“This is what people are now looking at … where are you going to put all of the oil?” he asked. When oil storage runs out, prices could fall further, he added. “I think the prices that we’re seeing, that you’re talking about today are really precursors … April is going to be a very difficult month,” concluded Yergin.
More than 700,000 people have been infected by COVID-19, while nearly 35,000 people have died so far across the globe.
Technical analysis: New 18-year low in place
Following the creation of a 18-year low of $20.07 two weeks ago, oil prices went further lower today to print $19.88, marking the first trip south of the $20 handle since February 2002.
As seen in the chart above, the price action is currently testing the key Fibonacci extension near the $20.50 mark. A break of this zone opens the way for a quick trip towards the $17 handle, where an important horizontal support is located.
Crude oil price has dropped below the $20 handle today to hit a fresh 18-year low. The price action is now testing the key support, which, if broken, may pave the way for more losses. One of the most prominent oil analysts has also warned that the worst is yet to come for market oil prices due to the collapse in demand.