Oil prices sink below $28 on Covid-19 travel bans
Oil prices have fallen below $28 a barrel as coronavirus continues to batter the world economy.
Worldwide travel bans as a result of the worsening Covid-19 pandemic have driven oil prices down even further after a price war between Saudi Arabia and Russia.
The price of Brent crude fell four per cent to $27.64 today. And West Texas Intermediate (WTI) plunged 5.6 per cent to $25.75.
Airline stocks, and transport stocks more widely, have plunged amid the coronavirus crisis as countries put in travel restrictions to curb the spread of coronavirus.
Speaking in the House of Commons yesterday, foreign secretary Dominic Raab advised British nationals “against all non-essential travel for 30 days”.
The EU has instituted a ban to most non-member states for 30 days while the US has extended a 30-day travel ban on EU countries to the UK and Ireland.
Those have compounded an oil price war between Saudi Arabia-led oil cartel Opec and Russia. Russia last week refused to agree to further production cuts to prop up oil prices as coronavirus killed demand.
That led the Saudis to flood the market with cheap oil to steal customers from Russia.
“Oil has sunk to its lowest in 17 years, with WTI taking a $25 handle this morning,” Neil Wilson, chief market analyst at Markets.com, said.
“A collapse on the demand side due to coronavirus and the eruption of a price and supply war in Opec and Russia has created the most bearish conditions imaginable for crude markets.”
Shares in major oil producers were down this morning as a result.
BP shares have fallen 5.64 per cent to 245p and those of Shell fell 6.8 per cent to 956.77p.
There have also been warnings the UK government could have to take further steps to support airlines and airports.
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The current extreme low of oil prices contrast with a level of $50 during February.
Analysts have suggested Saudi Aramco, Saudi Arabia’s state-owned oil producer, is satisfied with this situation. That means the low prices are likely to persist for some time.
There have also been warnings the price could fall as low as $20 a barrel.
At the same time, stock markets around the world have seen dramatic falls due to uncertainty caused by the pandemic.