Oil prices have slumped again on Thursday, following the declaration of a travel ban placed on European countries by the United States (US) government.
For instance, Brent Crude went down to $33.88 in the early hours of Thursday, before it fell to $33.45 later in the day. Also, the US crude went down to $31.24 after dropping 4% in the previous session.
President Donald Trump announced the 30-day travel ban against European countries after the World Health Organisation (WHO) made a declaration branding the Coronavirus as a global pandemic.
According to Trump, the 30-day travel order will apply to citizens of 26 European countries excluding Britain, Ireland and American citizens, and will only apply to humans, not cargoes.
The market worries are further complicated by the threat of cheap supply as Saudi Arabia has promised to raise oil output to match Russia’s supply in their price war.
The United Arab Emirates followed Saudi Arabia in announcing its plans to boost oil output after the collapse of the OPEC agreement last week, notwithstanding Russia and other producers, a grouping is known as OPEC+, the decision to withhold supply and buttress prices.
UAE’s national oil company, ADNOC, said it was set to raise crude sales to more than 4 million barrels per day (bpd) and accelerate a push to boost capacity by a quarter to 5 million barrels per day.
The Airlines industry association has also stated that the surprise ban would result in a further drop for jet and other fuels, hitting the already battered aviation industry ‘extremely hard’.
With the OPEC agreement sidelined, the global oil market has no regulator and is left at the mercy of market mechanisms using the balance of demand and supply to determine the price.
Speaking to Reuters, Espen Erlingsen, head of upstream research at Rystad Energy, estimated that oil would need to fall to the low $20s to achieve equilibrium.