The oil market is headed for its largest weekly collapse since 2008 as a bitter price war erupted between OPEC and its allies, and demand cratered from the coronavirus outbreak. Futures in New York are down 21% this week, more than any other period since the financial crisis. Stockpiles may grow by the most on record in April as Saudi Arabia and Russia race to increase production, according to Goldman Sachs, as the market’s structure returned to a super-contango, indicating a big glut. The warning signs on the demand side continued to grow as gasoline prices fell by almost a quarter on Thursday as President Donald Trump issued a travel ban from Europe.
Markets recovered some of those losses on Friday as equities pared Thursday’s slump and U.S forces undertook a retaliatory attack on an Iraqi militia. Still, signs of fear in the market abounded, with one gauge of volatility higher than in the financial crisis.
The schism between the former OPEC+ allies appeared to harden as Russian oil producers said they plan to ramp up production next month, while the Kremlin said there are no plans for discussions with Saudi Arabia. The kingdom said earlier in the week that it would boost output by more than 25% in April. Meanwhile the major oil agencies all slashed their demand outlooks this week, as it looked increasingly likely that consumption will contract this year.