U.S. crude fell below $30 on Monday as emergency rate cuts by the U.S. Federal Reserve and its global counterparts failed to tame markets and China’s factory output plunged at the sharpest pace in 30 years amid the spread of coronavirus.
Brent crude was down $2.89, or 8.5%, to $30.96 a barrel by 1012 GMT. The front-month price had risen $1 earlier in the session.
U.S. West Texas Intermediate crude was at $29.94, down $1.79 or 5.6%.
To combat the economic fallout of the pandemic, the Fed on Sunday cut its key rate to near zero, triggering an unscheduled easing by the Reserve Bank of New Zealand to a record low as markets in Asia opened for trading this week.
The Bank of Japan later stepped in by easing monetary policy further in an emergency meeting. However, the measures failed to calm the investors, and stock markets weakened again.
“It’s becoming evident that the major central banks across the globe are using all their available tools to prevent a crisis, but it seems the fear of the pandemic is taking control of investors,” said Hussein Sayed, chief market strategist at FXTM.
Meanwhile, China’s industrial output fell by a much larger than expected 13.5% in January-February from the same period a year earlier, the weakest reading since January 1990 when Reuters records began.
Brent’s premium to WTI is close to its narrowest since 2016, making U.S. crude oil uncompetitive in international markets.
“The relative weakness in Brent shouldn’t come as too much of a surprise, given the severity of the breakout across Europe,” said ING analyst Warren Patterson.
“Another factor offering relatively more support to WTI is news that President Trump has ordered Strategic Petroleum Reserves to be filled up at these lower price levels.”
U.S. President Donald Trump said on Friday that the United States would take advantage of low oil prices and fill the nation’s emergency crude oil reserve, in a move aimed to help energy producers struggling from the price plunge.
Oil prices have also been under intense pressure on the supply side, as top exporter Saudi Arabia ramped up output and slashed prices to increase sales to Asia and Europe.
This month, the OPEC and Russia failed to extend production cuts that began in January 2017 aimed at supporting prices and lowering stockpiles.
Despite the massive drop in both oil and natural gas prices last week, the U.S. oil drilling rig count rose for a second week in a row to its highest since December, energy services firm Baker Hughes Co said on Friday.