WASHINGTON (DTN) -- Oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange softened further Monday, pressing front-month West Texas Intermediate contract below $20 barrel (bbl) in intra-session trade as tightening travel restrictions and lockdowns across major economies have wiped out millions of barrels of global oil demand, with the lost demand so deep not even a renewed Saudi-Russian supply pact would provide enough support to push prices higher, according to some analysts.
After spending most of the session below $20 bbl, trading at an 18-year spot low $19.27, NYMEX May West Texas Intermediate futures pared losses in market-on-close trade to settle down $1.42 at $20.09 bbl. ICE May Brent plunged a steeper $2.17 to settle at an 18-year spot low $22.66 bbl, with the next month delivery June Brent futures narrowing its premium against expiring contract to $3.66 bbl. May Brent futures are set to expire Tuesday afternoon. NYMEX RBOB April contract reversed earlier losses to settle at $0.5855 a gallon, up 1.18 cents from the previous session. Next month delivery RBOB June futures held a 3.13 cents premium to the expiring contract at settlement. NYMEX ULSD April contract dropped 4.91 cents to settle at $1.0194 gallon after posting its first advance during the week ended March 27 since mid-February.
Monday's session brought more pain to an oil complex bleeding out amid a seismic drop in global oil demand as a worsening world health crisis roils major economies worldwide, shattering businesses and locking down billions of people. Investment bank Goldman Sachs forecasts some 16 million barrels per day (bpd) of global oil consumption from airlines and commuters may never return to pre-pandemic levels, while calling coronavirus a "game changer" for the oil sector.
Not even reports that U.S. President Donald Trump and Russian President Vladimir Putin agreed to high-level bilateral talks to resolve the growing crisis aided oil prices Monday. A slew of analysis suggests pandemic might have created a demand shock so deep that no multilateral supply agreement could address the crisis adequately.
Oil prices have dropped below breakeven price points for most global oil producers, with Rystad Energy pegging the average U.S. cost of crude production at $35.90 bbl. Low prices are beginning to prompt producers to slow output, with Baker Hughes on Friday reporting the U.S. oil rig count dropped by 40 last week, the largest weekly decline since April 2015, to a three-year low 624.
As the pandemic spread shows no signs of abating, governments around the world have tightened travel restrictions and social distancing guidelines, forcing investors to reset portfolios for a longer-than-expected period of coronavirus disruptions. The U.S. government announced Sunday the country would need to abide by social distancing restrictions through at least April 30, a longer timeline than initially envisioned, further impairing prospects for a speedy recovery in the world's largest oil consumer. Over the weekend, mortality rate in U.S. hotspots such as New York and Louisiana continued to rise exponentially and Dr. Anthony Fauci, the director of the National Institute of Allergy and Infectious Diseases, warned the U.S. death toll could reach 200,000.
U.S. equity indexes were higher on Monday, rallying late session on the back of record $2 trillion U.S. stimulus package signed into law late last week.
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