The oil crash deepened on Monday, sending prices to an 18-year low in a stark demonstration of how the coronavirus is crippling fuel demand and leaving consumers unable to take advantage at the pump.
U.S. crude-oil futures slumped 6.6% to $20.09 a barrel, ending the day at their lowest level since February 2002. The drop brings their slide for the year to 67%, or $41. Oil enters the final trading day of March on pace for its biggest percentage drops on record for any month or quarter, according to according to a Dow Jones Market Data analysis of figures going back to 1983.
The latest declines came after President Trump said he was extending his administration’s social-distancing guidelines to fight the coronavirus for another 30 days through the end of April, causing industry analysts to further lower their expectations for fuel consumption. The pandemic has halted economic activity and global travel, resulting in a historic drop in oil demand.
Typically when fuel prices plummet, consumers drive more, helping the energy sector recover. That process can’t occur due to the restrictions on travel and movement in place around the world to fight the virus, leaving traders to project a massive surplus of oil and even lower prices ahead.
Oil pump jacks near Midland, Texas.
Photo: jessica lutz/Reuters“The longer the stay-at-home-orders are in place, the worse it gets,” said Andy Lipow, president of Houston-based consulting firm Lipow Oil Associates. “The demand door was slammed shut into the face of the oil industry.”
While U.S. crude futures are near $20, regional prices in places like Midland, Texas, are even lower, underscoring the existential threat facing energy producers around the world. The slide is set to dent economic growth for emerging markets from Saudi Arabia to Brazil, potentially exacerbating the fallout from the coronavirus.
As the disease slashes millions of barrels a day from oil consumption, a price war between Saudi Arabia and Russia has made the rout even more painful. The world’s leading energy exporters, along with the Organization of the Petroleum Exporting Countries, weren’t able to reach a deal to lower supply earlier this month and are now set to make a global glut even bigger.
To help protect U.S. energy producers, the Trump administration is considering intervening in the Saudi-Russian oil-price war, and Texas regulators are weighing whether to curtail crude production for the first time in decades, The Wall Street Journal reported earlier this month.
Shale producers Pioneer Natural Resources Co. and Parsley Energy Inc. sent a letter Monday requesting that the Railroad Commission of Texas hold a hearing on the idea of curbing crude production, The Journal reported.
In an interview with “Fox & Friends” on Monday, Mr. Trump said, “we don’t want to have an industry that’s wiped out” and that Saudi Arabia and Russia “both went crazy.”
“I never thought I’d be saying that maybe we have to have an oil [price] increase,” he added. He had for years called for lower fuel prices.
The president later in the day held a call with Russian President Vladimir Putin in which the two agreed on the importance of stability in global energy markets, White House deputy press secretary Judd Deere said in a statement.
Shares of U.S. energy companies rose alongside the broader stock market on Monday, but the S&P 500 energy group is still down 52% for the year, erasing hundreds of billions of dollars in market value from shale producers. Many companies—including Exxon Mobil Corp., Pioneer and Parsley—have pledged to cut spending in response to the crisis.
Monday’s slide in crude reflects a new view that even cutting supply might not be enough to boost oil prices with the transportation industry at a standstill. Brent crude, the global gauge of oil prices, fell 8.7% to $22.76 a barrel, another signal that a longer economic shutdown could batter the oil patch even more.
“As the tail of Covid-19 gets fatter, more analysts are going to have to bring down their oil-demand numbers for May and June,” said Edward Marshall, a commodities trader at Global Risk Management. “At that point, we could see sub-$20-a-barrel Brent.”
Industry analysts say there is a limit to how much oil can be stored in the U.S. and in tankers around the world, one that could be reached if the amount of crude stockpiled continues surging. As that process continues, it should keep prices under pressure, traders say—even if producers begin holding back supply.
“The potential supply shortage which will be caused by producers shutting in production will not be enough, and I don’t think it will have any price supportive action in the next three months,” said Tamas Varga, an analyst at brokerage PVM Oil Associates. “All in all, the situation is dire.”
—Catherine Lucey contributed to this article.
Write to Amrith Ramkumar at amrith.ramkumar@wsj.com and David Hodari at David.Hodari@dowjones.com
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