US crude oil plunged another 6% to $31 a barrel on Thursday after President Donald Trump announced the travel restrictions with Europe in a bid to contain the coronavirus pandemic. Crude dropped to as low as $30.02 a barrel. At that level, it was down 27% for the week.
The travel ban is only intensifying fears in the oil patch about demand destruction for energy products.
“The move is unprecedented so the full fuel demand impact is largely unknown,” Ryan Fitzmaurice, energy strategist at Rabobank, said in an email. “This is on top of the very public OPEC+ skirmish that has oil producers opening the proverbial faucets in an effort to flood the market.”
At the same time, investors around the world are fleeing from risky assets of all stripes, including stocks, junk bonds and yes, commodities.
Against that backdrop, Brent crude, the global benchmark, dropped 7% Thursday to $33.30 a barrel.
‘Loss of confidence’
Rystad Energy estimates that the travel ban with Europe will cause the loss of 600,000 barrels per month in jet fuel demand. That’s on top of the 700,000 barrels per month that the firm had previously estimated due to earlier coronavirus disruptions.
Beyond the demand implications, the travel ban with Europe is weighing on investor confidence.
“It leads to further loss of confidence in the governments’ handling of the fallout and increases uncertainty about the extent of the virus impact on the overall economy,” Bjoernar Tonhaugen, head of oil markets at Rystad Energy, said in an email.
Big Oil under siege
The crash in oil prices has slammed the energy companies large and small. The energy sector of the S&P 500 plunged 10% Thursday alone.
Despite these concerns, Icahn has been aggressively buying Occidental’s beaten-down stock in recent days. Icahn, who is seeking to oust Occidental’s board, has quadrupled his stake in the company to around 10%, his representatives confirmed to CNN Busness.