Oil set for worst week since 1991 as it falls a third day

Brent crude is set to plunge nearly 28 per cent, while WTI is inching towards dropping 25 per cent this week

Russia and Saudi Arabia to cut oil production of at least 10 million barrels, according to a tweet by US President Donald Trump on Thursday. Reuters

Oil fell for a third day as the horror show for crude investors continued on Friday amid panic about evaporating demand from the coronavirus pandemic, with Brent set for its biggest weekly loss since 1991 and US crude heading for its worst week since 2008.

Brent crude was down 1.4 per cent at $32.75 a barrel after falling more than 7 per cent. For the week, Brent is set to fall nearly 28 per cent, the biggest weekly decline since the week of January 18, 1991, when it fell 29 per cent at the outbreak of the first Gulf War.

US West Texas Intermediate crude was down 1.7 per cent at $30.96 a barrel. It is set to drop 25 per cent this week, the most since the week of December 19, 2008, when it fell 27 per cent at the height of the global financial crisis.

As travel bans, cancelled events and other economic disruptions eat into crude demand, major oil producers are announcing plans to add more crude to an oversupplied market.

Earlier this week, Saudi Arabia - the world's largest oil exporter - announced that it will increase its production capacity by 8.3 per cent to 13 million barrels per day following the collapse of the Opec+ alliance, led by the kingdom and Russia. The UAE has also announced it will raise its crude supply to more than 4m bpd starting next month.
Oil prices were also hurt by record declines in equity markets with Japan's Nikkei 225 falling by 10 per cent on Friday after US markets fell by the most since Black Monday in 1987 on Thursday.

President Donald Trump announced a ban on travel to the US from Europe that sent the markets swooning as everything from sporting events to weddings were cancelled across many parts of the world with coronavirus spreading to more countries.

"With the coronavirus triggering the first global oil demand drop in years, the surge of Saudi Arabian and Russian oil production could lead to a supply overhang of 4m bpd," Eurasia Group said.

Four million barrels is about 4 per cent of daily global consumption before the coronavirus outbreak that started in China.

US energy historian Daniel Yergin said it may be some time before oil markets are relieved as coronavirus courses through the world and disrupts daily life.

However, the price slump may be doing the work needed to reduce supply. Energy companies in the US, the world biggest crude producer, are preparing to cut investment and drilling plans because of the plunging prices.