Steep drop in oil price fueled by COVID-19 and oversupply

The fall in global oil demand from COVID-19 along with recent oversupply are driving a fast and deep drop in oil prices. Initially, the price dropped 12 percent in the first 13 days, following a pattern similar to declines after the SARS outbreak (2003), the attacks on the World Trade Center (9/11), and the Lehman Brothers collapse (2008). However, since March 9, the decline has been steeper, as Russia and Saudi Arabia have failed to agree to a reduction in supply. Twenty-five days into the COVID-19 crisis (March 23rd), oil prices have declined 55 percent to about $23.36 per barrel. In contrast, the Lehman crisis reached this low point after 59 days, and the 2014 oil price collapse reached it in 139 days. An agreement between oil-producing nations to curb production could prevent a further fall in prices, though weak global demand will keep prices bearish for longer.