Senators call on Saudi Arabia to allow the price of oil to stabilize: Sen. Ted Cruz

Описание: Sen. Ted Cruz (R—Texas) joins "Squawk Box" by phone to discuss how the U.S. should respond to Russia and Saudi Arabia's move to produce a surplus of oil, driving down prices.

U.S. oil dropped more than 9% to an 18-year low on Monday as demand continues to evaporate, and as Saudi Arabia and other OPEC+ nations prepare to ramp up production.

With much of the world in lockdown as the coronavirus pandemic rages on, demand for oil has fallen off a cliff. People aren’t travelling and business has slowed, reducing the need for jet fuel and gasoline.

U.S. West Texas Intermediate crude dropped 9.4% to trade at $19.35 per barrel, a more than 18-year low. The contract had briefly traded below the key $20 per barrel mark on March 20, although it was in thin trading on a contract that was set to expire. International benchmark Brent crude fell 12% to trade at $22.95 per barrel, a price last seen in 2002.

The drop-off in demand comes just as the OPEC+ production cuts expire. Beginning April 1 the 14-member cartel and its allies will be able to pump as much oil as they please, and Saudi Arabia is among the nations that has vowed to ramp up its production.

Given the hit to both supply and demand, analysts are projecting that despite WTI’s 54% slide this month — its worst on record — there could still be more downside ahead.

“With the effects of COVID-19 continuing to weigh on global demand, it’s likely global crude storage capacity maxes out in 2Q20, creating a nightmarish scenario and the possibility that crude could test the $10/bbl threshold,” Raymond James analyst John Freeman said in a note to clients Monday.

As the outlook becomes bleaker, Bank of America again downgraded its oil price forecasts on Monday, and expects to see both contracts “temporarily trading in the teens in the coming weeks.”

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