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Oil prices show sharpest weekly decline since 2008

An Iranian tax driver seen filling up at a CNG/Petrol Station [file]
An Iranian tax driver is seen at a petrol station on 26 May 2018

Oil prices fell on Monday as an emergency US Federal Reserve interest rate cut failed to calm global financial markets from the panic caused by the rapid spread of the coronavirus. A price war between major producers is adding to a growing supply glut.

Brent crude fell $2.07 to $31.78 a barrel to continue a decrease of 25 per cent recorded last week in the largest weekly decline since 2008. US crude fell $1.38 to $30.35 a barrel after falling to below $30 a barrel earlier during the session despite US President Donald Trump's pledge to fill strategic petroleum reserves (SPR) in the world's largest oil consumer.

Michael Tran, analyst at RBC Capital Markets, said: "While this helps marginally, the policy regarding [the Strategic Petroleum Reserve] is dwindling compared to a market afflicted with the coronavirus, which is measured in months and compared to a price war that is expected to continue for several seasons or more."

Tran explained that the strategic oil reserves amount to 634 million barrels, which is only about 80 million barrels less than the overall capacity of 714 million barrels. Thus, the government purchases will only withdraw a global surplus for about 20 days, which is estimated by RBC Capital Markets to reach 4 million barrels per day.

The US Federal Reserve cut its target range for interest rates to near zero on Sunday in the second emergency cut this month, saying it would raise its budget by at least $700 billion in the coming weeks in an attempt to ease tensions in the financial markets.

READ: 'Irresponsible' Saudi condemned for triggering oil price war as world faces threat of coronavirus 

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