Oil prices fell today, after three sessions of gains, as plunging demand due to restrictions on movement worldwide to contain the coronavirus overshadowed expectations that a $2 trillion US stimulus package will bolster economic activity.
Brent crude futures fell 35 cents, or 1.3%, to $27.04 a barrel this afternoon, while West Texas Intermediate (WTI) crude futures dropped 79 cents, or 3.1%, to $23.70 a barrel.
Both contracts are down about 60% this year.
The US Senate last night overwhelmingly backed a $2 trillion bill aimed at helping unemployed workers and industries hurt by the impact of the coronavirus epidemic.
But with demand disappearing and output rising, the outlook for oil is bleak.
Goldman Sachs forecast global oil demand, which stood at around 100 million barrels per day (bpd) last year, will fall by 10.5 million bpd in March and 18.7 million bpd in April.
For the year, oil consumption is expected to contract by around 4.25 million bpd, the Wall Street bank said.
"Global isolation measures are leading to an unprecedented collapse in oil demand," it said.
The weakening demand is leading oil refineries from Texas to Thailand to reduce operating rates.
That, in turn, will increase pressure on crude prices that Goldman expects will remain near $20 a barrel in the second quarter.
The world's top oil and gas companies responded quickly to the price collapse, slashing spending by around 20%.
Brazil's Petrobras said today it was dialling back short-term production by 100,000 bpd, delaying a dividend payment and trimming its 2020 investment plan.
At the same time, the collapse of a supply-cut pact between the Organization of the Petroleum Exporting Countries and other producers led by Russia, known as OPEC+, is set to boost oil supply, with Saudi Arabia planning to ship more than 10 million bpd from May.
Oil stocks are already rising with tanks around the world filling fast despite a 50%-100% jump in leasing costs.
Efforts by the US to persuade Saudi Arabia to limit supplies as its shale oil industry struggles with the price collapse were unlikely to have much effect, Dutch bank ING said.
"Even if we do see some restraint from the Saudis, the world is still set to see a significant oil surplus over 2Q20, given the demand hit we are currently seeing. This suggests that any potential action would likely only stabilise prices, rather than push the market significantly higher," ING said.
US crude inventories rose by 1.6 million barrels last week, marking the ninth week of increases in a row.
Products supplied, a proxy for US demand, dropped nearly 10% to 19.4 million bpd, government data showed.