WTI settles at 18-year low as COVID-19 pandemic concerns spread

Crude futures declined for a third straight session as COVID-19 contagion fears sowed economic uncertainty, blunting demand outlooks.

ICE May Brent settled down $3.85/b at $24.88/b and NYMEX April WTI moved $6.58/b lower on the day to settle at $20.37/b.

"The market is very concerned about the scope of coronavirus, ... obviously the market keeps looking for some type of reassurance that this is going to end sometime soon and the comments that keep coming out seem to suggest this will get worse before it gets better," Price Futures Group senior market analyst Phil Flynn said. "Concerns about job losses and bankruptcies grow with every passing day."

Front-month Brent slid 13.4% on the day to its lowest since May 2003, while prompt WTI futures were down more than 24% from Tuesday and were last lower in early February 2002.

"Oil prices seem to be fighting a three-headed monster that is a global recession, oversupply deluge, and demand destruction," OANDA senior market analyst Edward Moya said. "It doesn't seem like anyone is getting on a plane anytime soon and with social lockdowns likely to remain in place for at least a month, oil seems like it has only one direction to go."

NYMEX April ULSD was down 8.15 cents on the day at 95.42 cents/gal, falling below the $1/gal mark for the first time since February 2016. NYMEX April RBOB settled 7.37 cents lower at 63.77 cents/gal, a fresh all-time record low for the contract since it launch in October 2005.

Oil prices moved off lows in aftermarket trading as US equity markets rallied from session lows. The Dow Jones Industrial Average, which was down around 2,400 points at the close of oil trading, rallied 1,000 point to finish Wednesday down 1,340 points.

US President Donald Trump on Wednesday said his administration would invoke the Defense Production Act as part of its response to the coronavirus outbreak. The act grants the presidency sweeping authority to regulate the economy in order to promote national defense.

"The president invoking emergency powers and the Defense Production Act raises more questions than answers about how he is going to use those powers," Flynn said. "There is a lot of uncertainty in the market, and because of that uncertainty we haven't bottomed yet."

Adding to downward price pressure, weak refinery demand and return in crude production to all-time high 13.1 million b/d pushed US crude stocks up 1.96 million barrels last week, US Energy Information Administration data showed Wednesday.

Crude prices were already under pressure overnight after Saudi Arabia's energy ministry instructed Saudi Aramco to continue to supply 12.3 million b/d of crude to the market "during the coming months."

That was an expansion on its directive earlier this month for the company to supply 12.3 million b/d of crude to the market in April, once its OPEC production quota expires -- some 25% above current levels, as the kingdom showed no signs of backing down in its price war with Russia.

Aramco can pump crude at its maximum 12 million b/d capacity for a year without any new investment, its CEO said earlier this week. The remaining 300,000 b/d will be drawn from the company's vast global storage network.