The coronavirus pandemic has strangled the world's economies, silencing factories and airlines on the ground, reducing the need for fuel.
Oil prices fell on March 26 following three days of gains, with coronavirus travel bans and lockdowns offsetting hopes a $2 trillion United States stimulus package will shore up economic activity. Fuel demand is expected to fall sharply worldwide in the second quarter with aviation largely at a halt and road travel severely curtailed.
Crude oil prices on Wednesday rose 5.5 per cent to Rs 1,976 per barrel as participants widened their positions tracking a positive trend overseas. Overall fuel demand fell by almost 2.1 million bpd. West Texas Intermediate (WTI) crude futures fell 94 cents, or 3.8%, to $23.55 a barrel. USA crude futures fell 21 cents, or 0.9 per cent, to $23.80 a barrel.
With lockdowns in many countries, investors expect that oil demand will contract by more than 10 million barrels per day.
The losses were said to have been incurred partly due to Fatih Birol, executive director of the International Energy Agency, warning that demand could drop by as much as 20 million barrels per day (bpd), and by the White House deciding to rescind a crude buying offer after failing to win funding from Congress.
A combination of faltering demand resulting from the coronavirus outbreak and a price war that has seen a rise in production had already raised fears that the industry was entering its worst crisis in hundred years.
The U.S.' crude oil production is expected to average 13 million bpd in 2020, according to the EIA's Short-Term Energy Outlook report for March.
Equities resumed their slide today as a historic $2 trillion US fiscal stimulus deal failed to offset worries about a looming recession caused by the coronavirus spread.
"Global isolation measures are leading to an unprecedented collapse in oil demand", it said.
"A demand shock of this magnitude will overwhelm any supply response including any potential core-Organization of the Petroleum Exporting Countries output freeze or cut", the investment bank said.