WASHINGTON (DTN) -- New York Mercantile Exchange nearest delivery oil futures and Brent crude on the Intercontinental Exchange eroded further on Thursday, with both crude benchmarks in position to test this week's four-year lows after U.S. President Trump restricted all travel from Europe for 30 days as he unveiled measures to contain the coronavirus pandemic that has shattered global economic growth and energy demand.
Near 8:45 a.m. ET, front-month NYMEX April West Texas Intermediate futures were down $2.04 to $30.94 per barrel (bbl) and ICE Brent contract plunged a steeper $2.41 at $33.38 bbl. NYMEX April ULSD futures were down 9.75 cents near $1.1405 a gallon and NYMEX April RBOB contract broke below $1 gallon, falling to a more than four-year low on the spot continuous chart at $0.9564 gallon. RBOB's forward curve flipped from backwardation to contango midweek, erasing seasonal strength in the gasoline market, as driving demand is expected to be sharply curtailed due to the coronavirus.
In his emergency address on Wednesday, Trump announced new stringent measures to halt the spread of COVID-19 virus in the United States, including a ban on all travel from the 27-nation European Union.
World Health Organization on Thursday called for all governments to "double down" on their efforts to contain the deadly virus just hours after declaring COVID-19 a global pandemic. There are now over 120,000 cases of infections globally and nearly 4,400 confirmed deaths, including 38 in the United States.
New measures, however, failed to impress markets that took a heavy beating earlier in the week, halting their historic 11-year bull run on Wednesday. Dow Jones Industrial futures tanked another 5% in overnight activity, triggering a temporal halt in trading for the second time this week.
Oil prices fell over 25% this week amid a one-two punch of coronavirus slowing the global economy and the threat of cheap oil supply flooding the market following the breakdown of the OPEC+ alliance late last week. United Arab Emirates seemed to follow Saudi's lead to drastically hike its production in the coming weeks as it attempts to pressure Russia back to negotiating table.
UAE Energy Minister, Suhail Muhammed Faraj Al Mazroui said his country would raise production capacity to 4 million barrels per day (bpd) in April, with plans to further increase to 5 million bpd. Earlier this week, Saudi Arabia threatened to raise output to 13 million bpd, with production in February averaging 9.683 million bpd. If realized, both Gulf producers plan to add a combined 3.6 million bbl, equivalent to 3.6% in global oil supplies to the market at a time when the coronavirus has wiped out demand growth.
The three major forecasters this week all drastically reduced their oil consumption projections for the current year as a result of coronavirus slowing global economy. Organization of the Petroleum Exporting Countries said Wednesday it expects virtually zero oil demand growth this year, revising its outlook down 920,000 bpd from a month ago to 99.73 million bpd. OPEC economists were on the conservative side, with Paris-based International Energy Agency cutting its call for consumption growth by 1.1 million bpd to a 90,000 bpd year-on-year decline. If realized, this would be the first full-year contraction of global oil demand since the financial crisis of 2008.
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