Oil is on track for its biggest weekly decline since 2008 as the coronavirus pandemic wreaks havoc on fuel demand and threatens global economic stability.
Futures in New York tumbled 4.5 percent on Thursday and are on track for a 24 percent weekly drop. President Donald Trump’s restriction on travel from Europe for the next 30 days, in an attempt to contain the coronavirus, darkened the outlook for fuel demand.
At the same time, Brent crude’s one-year structure collapsed into a supercontango for the first time since 2015, suggesting a large oversupply as responses by the U.S. and European policy makers have failed to stem the price rout.
The fear of an economic crisis reverberated across U.S. equities triggering a 15-minute New York Stock Exchange-mandated halt in trading for the second time this week. The S&P 500 plunged into a bear market and the Dow Jones Industrial Average fell 10 percent in its biggest rout since Black Monday in 1987.
“This is a downward spiral” said Michael Lynch, president of Strategic Energy & Economic Research Inc. “This collapse is inciting the fear this will be a full blown recession. The pain is going to be so sharp for everybody.”