Oil's 66% plunge marks its worst quarter ever amid the double whammy of coronavirus and a global price war

oil rig

Oil just posted its worst quarterly performance ever, dragged down by the coronavirus pandemic and a global price war that's erupted at the same time.

US West Texas Intermediate crude is down as much as 66% year-to-date, while international benchmark Brent crude shed as much as 65% in the same time period. WTI trades at roughly $20.40 per barrel, while Brent crude is about $22.71 per barrel. Advertisement

Demand has fallen off sharply as the coronavirus outbreak has raged on - non-essential travel has been banned, leading to canceled flights, and consumers are being told to practice social-distancing measures, keeping gas prices depressed as well.

As demand took a hit, the Organization of the Petroleum Exporting Countries and its allies failed to agree on production cuts past March 31. Both Saudi Arabia and Russia are preparing to significantly ramp up production starting on April 1.

Saudi Arabia pledged to increase production to 12.3 million barrels per day in April, up from roughly 9.7 million barrels it produced per day in February. Russia has the capacity to increase output by 500,000 barrels per day, putting its total production at 11.8 million barrels per day. Both would be record outputs, boosting supply and causing a potential glut of the commodity.

Read more: Bank of America examined the stock market during every recession since 1929 and concluded the recent meltdown is not over. Here's their trading strategy for a deeper crash.

The situation could deteriorate even further, according to analysts. Bank of America on Monday lowered its outlook for oil, saying that global benchmarks could trade in the teens temporarily in April amid a demand shock. Plummeting oil prices have put increased pressure on energy companies and the US shale industry, which analysts now think have a heightened risk of default. JPMorgan expects cumulative high-yield energy default rates of 24%, mostly in 2021, assuming that crude rises to $40 per barrel in the second half of 2020 and gains to $50 per barrel the next year. That percentage will be even worse if oil does not recover losses. Advertisement

The US has tried to get involved in the ongoing price war, and President Trump has said that he would step in at the right time. Last week, Secretary of State Mike Pompeo spoke with the Saudi Crown Prince Mohammed bin Salman about the situation, the US State Department confirmed.

On Monday, Trump spoke with Russian leader Vladimir Putin about the oil market, Reuters reported. Sen. Ted Cruz and eight other GOP senators have spoken with a Saudi ambassador over the price war, CNBC reported.

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