- Two days of declines add to Monday’s market rout.
- Trump bans travel to U.S. from Europe.
Oil prices fell for the second straight day onÂ Thursday amid a broad decline in global markets after the United States bannedÂ travel from Europe following the World Health Organization’s decision to declareÂ the coronavirus outbreak a pandemic.
The slump in oil is being compounded by the threat of a flood of cheapÂ supply as Saudi Arabia promised to raise output to a record high in its standoffÂ with Russia.
Brent crudeÂ was trading down $1.65, or 4.6%, at $34.14 by aroundÂ 0718 GMT, a little above earlier lows. The contract fell nearly 4% on Wednesday.Â
U.S. crudeÂ was down $1.38, or 4.2%, at $31.60 after also dropping 4%Â in the previous session.
The two benchmarks are down about 50% from highs reached in January and hadÂ their biggest one-day declines on Monday since the 1991 Gulf War after SaudiÂ Arabia launched a price war.
The price difference between near-term and longer-term Brent prices also widened to the most in five years, prompting traders to fillÂ tankers with oil to store for later delivery when they are betting prices willÂ be higher.
Global shares were also down on Thursday after U.S. President Donald TrumpÂ said the United States will suspend all travel from Europe as he unveiledÂ measures to contain the coronavirus epidemic.
The travel ban, which excludes Britain, will hit U.S. airlines “extremelyÂ hard”, their industry association said.
The surprise move is likely to mean a further drop in demand for jet andÂ other fuels in an already battered oil market, although just how much is hard toÂ quantify.
“This is what a large positive supply shock and a large negative demandÂ shock looks like,” said Lachlan Shaw, head of commodities research at NationalÂ Australia Bank in Melbourne. “It’s hard to come up with a more bearish scenario.”
The United Arab Emirates followed Saudi Arabia in announcing plans to boostÂ oil output after the collapse last week of an agreement between OPEC, Russia andÂ other producers, a grouping known as OPEC+, to withhold supply and buttressÂ prices.
UAE’s national oil company, ADNOC, said it plans to raise crude sales toÂ more than 4 million barrels per day (bpd) and accelerate a push to boostÂ capacity by a quarter to 5 million bpd.
“Without OPEC+, the global oil market has lost its regulator and now onlyÂ market mechanisms can dictate the balance between supply and demand,” said EspenÂ Erlingsen, head of upstream research at Rystad Energy, which estimates that oilÂ will need to fall to the low $20s to achieve equilibrium.
The U.S. Energy Information Administration (EIA) and the Organization of theÂ Petroleum Exporting Countries (OPEC) have slashed forecasts for oil demandÂ because of the coronavirus outbreak and now expect demand to contract thisÂ quarter.
Still, weekly data on U.S. inventories showed minimal effects from theÂ coronavirus pandemic so far. Crude stocks increased by 7.7 million barrels, butÂ inventories of gasoline and diesel fell sharply, as refining runs remain atÂ seasonally low levels.Â