Oil price drops to lowest level since 2003 as demand for energy weakens due to slowing global economy

Crude prices hit a 17-year low as they continued to plunge on Wednesday amid fears that the coronavirus outbreak and containment measures could trigger a global recession.

The price of US West Texas Intermediate (WTI) for April delivery fell six percent and was trading below $26 per barrel. If prices continue to drop, by the end of the day they could close at the lowest level since May 2003.

Futures for the international benchmark, Brent crude, were down more than three percent, trading below $28 per barrel as of 10:00am GMT.

The market rout continues as global demand for energy remains weak due to the coronavirus pandemic. The disease, which is believed to have originated in the world's largest oil consumer, China, is now raging across Europe, the US, and the Middle East, claiming around 8,000 lives around the globe and infecting nearly 200,000 people.

On Tuesday, Goldman Sachs slashed its oil price forecast again citing “unprecedented” demand losses. The bank now expects both WTI and Brent to trade at around $20 per barrel in the second quarter.

Apart from the coronavirus, the ongoing row between two major oil producers, Russia and Saudi Arabia, has been affecting the energy market. After the two failed to reach a new deal on production cuts, Saudi Arabia pledged to dramatically ramp up production and give discounts to its buyers in a move that may further shake the already oversupplied market.

Meanwhile, Russian state lender Sberbank says that it has already been looking into worst-case scenarios for the economy amid the coronavirus pandemic. According to Sberbank CEO Herman Gref, the most stressful outcome includes oil going down to $20 per barrel and Russia’s national currency tumbling to 100 rubles per dollar. However, Gref believes that the bank will manage to stay afloat even under those circumstances.

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