Oil prices continue to drop

Avi Salzman reports in part in Barrons,

...Demand for petroleum products has fallen dramatically as people around the world stay home to combat the coronavirus, so producers are having trouble finding buyers for their barrels at almost any price. Spot prices at some U.S. pipelines have fallen below $10 a barrel.

The near-term fate of the oil industry is in the hands of a very few players—most important, the ruling family of Saudi Arabia. Its decision to move ahead with a production boost on Wednesday means the world will be awash in oil at a time when oil demand is plummeting because of the coronavirus.

The U.S. urged Saudi Arabia and Russia to back off plans to increase production. While Russia is reportedly not going to pump more, the kingdom ignored the plea. It plans to raise production to 12.3 million barrels a day, up from 9.7 million a day in February. Oil prices, already down more than 50% in March, were moving lower on Wednesday. Brent crude futures fell 5.7% to $24.84, while West Texas Intermediate futures were trading flat.

Saudi Arabia is angling to take market share from U.S.-based producers, after those oil drillers have taken share at the kingdom’s expense for the past few years. Saudi Arabia tried this in 2014, boosting production to force prices lower. But while the rate of bankruptcies for U.S. producers rose, production dipped only temporarily and the U.S. continued its market-share gains. That time, prices fell to $26.

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