Crude oil prices went up on Friday as policy leaders around the world promised a huge injection of capital and other measures to limit the weakening world economy from the coronavirus pandemic, despite concerns the virus will destroy demand for oil.
Brent crude was up 0.8%, at $26.19 a barrel by 08.17 Nigerian time, while U.S. crude was 1.9%, at $22.73 per barrel.
Both of the benchmarks are down nearly two-thirds in 2020 and the plunge in economic activity and fuel demand has forced massive pullback in investment by energy firms.
Oil demand around the world may drop by 20% as 3 billion people are in lockdown, the head of the International Energy Agency said as he called on major producers like Saudi Arabia to help stabilize oil markets.
Leaders of the Group of 20 major economies pledged yesterday to inject over $5 trillion into the global economy to limit job and income losses from the coronavirus and “do whatever it takes to overcome the pandemic.”
However, most are offloading their oil for below $20 a barrel as the coronavirus pandemic savages demand and global supply rises amid a battle between Saudi Arabia and Russia for market share, according to traders, state oil firms, major refiners and prices quoted in physical markets.
While all types of crude have been hit, so-called light and medium sweet grades are the least in demand, meaning the outlook is bleaker for countries such Nigeria, according to traders in oil from those countries.
The discounting is leaving revenue per barrel at a fraction of the prices factored into many 2020 budgets, which is likely to put even more pressure on government finances in some oil producing countries.
Nairametrics had reported that Nigeria is facing the toughest fiscal crisis in a decade based on its reliance on oil revenue. The country is set to witness a decline as its income from oil and gas is projected to fall by between 50% and 85% in 2020, reaching the lowest levels in more than 17 years.
Oil briefly traded below its lowest price since 2003 as the coronavirus pandemic threatens to bring the global economy to a standstill, weakening demand just as supply explodes.
Oil prices fell as political leaders around the world escalated lockdowns to curb the spread of the global coronavirus pandemic that has plunged the demand outlook for oil and threatened global economic growth. For instance, as at March 23, Brent crude futures dropped by $1.09, or 4%, to $25.39 a barrel by 12.30-noon Nigerian local time. West Texas Intermediate crude was down 0.7%, at $22.48 per barrel.
Many oil firms have rushed to reduce spending and some producers have already begun putting employees on leave.
The energy market has had to contend with the twin shocks of the demand destruction caused by the coronavirus pandemic and the unexpected oil price war that erupted between producers Russia and Saudi Arabia earlier February.