“Crude prices plunged further over the weekend, with WTI slipping below $20 and Brent around the $23 level, as Saudi Arabia said it was not in talks with Russia despite Washington pressuring both sides to help stabilise markets.
“The potential for a renewed supply pact had been one of the few factors helping to prop up benchmarks, as coronavirus-driven demand destruction has continued to outweigh global stimulus efforts.
“With major producers pumping barrels freely and the IEA suggesting that short-term demand could fall by a fifth due to travel restrictions, global storage is likely to hit capacity over the next two-to-three months. This is likely to be particularly damaging for US crude, with prices in the Permian region potentially hitting single digits. While we believe that current levels are unsustainable in the medium term given achievable breakeven prices, the ongoing uncertainty around COVID-19 and apparent stalemate between Riyadh and Moscow is likely to cause continued downward pressure over the coming weeks.
“While prices have not yet reached the relative falls seen during the Global Financial Crisis of 2008, the rate of the crash is unprecedented, and the pain looks far from over. “
