Oil near 18-year low as OPEC slashes demand forecast

Global demand drop would be first since 2008-09

Oil prices hovered near their lowest level in 18 years after a monthly OPEC report projected global demand would fall by 6.9 million barrels per day amid the COVID-19 pandemic.

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West Texas Intermediate crude, the U.S. benchmark, closed flat at $19.87. Brent crude, the international standard, was up 0.47 percent at $27.82.

“The impact of the COVID-19 outbreak in China in the first quarter of 2020, and its negative impact on transportation and industrial fuels in the country, has since spread globally and is now affecting oil demand growth in most other countries and regions,” OPEC's monthly oil report said, adding that global demand was on track for its first annual decline since 2008-2009.

The COVID-19 pandemic has caused governments around the world to issue “stay-at-home” orders, crushing demand as producers grappled with a supply glut worsened by the recently resolved price war between Saudi Arabia and Russia. As a result, WTI has plunged by 67 percent so far this year.

Thursday’s report follows a separate briefing from the U.S. Energy Information Administration the prior day that said 9.3 million barrels a day of global demand has been zapped.

In order to combat the one-two punch of ballooning inventory and weaker demand, the world’s largest producers on Sunday agreed to a historic cut that will reduce output by about 20 million barrels a day.

OPEC producers and their allies, including Russia, will lower their output by 9.7 million barrels a day in May and June while the rest of the cuts come from major players like the U.S., Canada and elsewhere, mostly as a result of lower prices. The agreement also calls for OPEC production to be lowered by 7.7 million barrels a day through the following year.

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“We are all in dire need of maintaining our commitment,” Saudi Arabia Energy Minister Prince Abdulaziz Bin Salman told FOX Business’ Maria Bartiromo in an interview that aired Wednesday. “None of us will gain if we don’t fulfill our commitment.”