A rare combination of severe shocks on both supply and demand pushed producers into an unexpected oil abundance and caused the crude oil market to collapse.
The coronavirus infected at least 138,000 people worldwide, killing more than 5,000 people, dragging the business life, markets, daily life into chaos and causing panic sales throughout the week in the oil market.
Major oil producers pumped more crude to the market, where demand has already collapsed. Saudi Arabia has rented more than 30 supertankers for the coming weeks and increased its fight for market share with Moscow, targeting major refineries of Russian oil.
Prices rose on Friday after the U.S. and other countries signaled plans to support weakening economies. Hopes for a US incentive package that could ease the economic shock of the coronavirus provided some support for oil and stock markets on Friday. However, Brent crude LCOc1fell 25% a week, the biggest weekly drop since the 2008 global financial crisis. On Friday, Brent rose 63 cents and settled for $ 33.85 a barrel.
West Texas Intermediate (WTI) crude CLc1 futures fell about 23% a week, the biggest percentage drop since 2008. WTI rose 23 cents and rose to $ 31.73 after a gallon reached $ 33.87 previously.
Russia, the second largest producer in the world, showed no interest in accepting the Petroleum Exporting Countries’ proposal for more production cuts. Russian oil producers met with Energy Minister Alexander Novak on Thursday, but did not discuss the issue of returning to the deal. The Russians are determined to increase production in April.
The energy companies in the US, which have become the world’s largest crude producer due to the volume increase in expensive shale gas oil, are preparing to reduce their investment and drilling plans due to shrinking prices.
The number of US oil drilling rigs count rose for a second week despite a massive drop in both oil and natural gas prices this week and expectations of many analysts that the number of rigs will fall in case producers deepen spending cuts.