New York — Crude oil futures hit fresh long-terms lows Monday after US President Donald Trump announced plans to extend social distancing in the world's biggest oil consumer until April 30.
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That added to the growing supply surplus in an already weak market, while refineries were starting to shut down on lower downstream product demand, industry sources said.
At 1125 GMT, May ICE Brent crude futures were down $2.09/b at $22.84/b -- after earlier hitting a $22.58/b low -- while the NYMEX May light sweet crude contract was down $1.10 at $20.41/b -- having earlier touched $19.92/b.
"The global oil surplus is increasing fast and refineries are rapidly shutting down because they either lose money for every barrel they process, or they have nowhere to put their oil products," said Bjarne Schieldrop, chief commodities analyst at SEB in a daily note.
"Damage today implies less production tomorrow once we have put COVID-19 behind us and the world is brimming with fiscal and monetary stimulus."
Schieldrop noted China was showing some revival, though global oil demand was still holding on to a downward trajectory.
"Estimates for the demand side are being revised downwards on an almost daily basis, while on the supply side there is still no sign of any reconciliation between Saudi Arabia and Russia," Eugen Weinberg of Commerzbank said.
"No one thinks that this is the end of it. The magnitude of the surplus is still rising, and inventories are rising even faster, and oil prices will head even lower." Schieldrop said.
The North Sea oil and gas industry has reduced activity in response to coronavirus, aiming to maintain production while avoiding most non-essential activity.
UK independent Siccar Point Energy, together with Shell, has decided to defer until next year a final investment decision on one of the biggest West of Shetland oil projects of recent decades, the Cambo field, due to the crisis resulting from the coronavirus pandemic, it said Monday.
However, some activity was continuing, for example drilling at Norway's Johan Sverdrup.
In the US, the oil and natural gas rig count dropped 47 to 766 in the latest week, according to rig data provider Enverus, as exploration and production operators continued to steeply reduce capital budgets and activity for 2020.
"While the front end of the Brent crude oil curve is heading lower and lower it is inflicting more and more pain and damage to oil production physically as well as oil producers financially," Schieldrop said.