Oil prices slid 10% on Monday as the acceleration in coronavirus cases worldwide, which is bringing travel and business to a standstill, further dents global demand for crude.
U.S. West Texas Intermediate crude dropped $3.03, or 9.5%, to settle at $28.70 per barrel. Earlier in the session WTI fell to a session low of $28.03 per barrel. International benchmark Brent crude fell 11.2%, or $3.80, to settle at $30.05 per barrel. Earlier it traded as low as $29.52, its lowest level since Jan. 2016.
"The demand drop unfolding is like nothing anyone has ever witnessed," Simmons Energy analyst Pearce Hammond said in a note to clients Sunday.
Oil is coming off what Hammond called a "horrific week" for the energy market. Both contracts posted their worst week since the financial crisis after dropping more than 23%, although prices did get a temporary boost Friday evening following President Donald Trump's call to fill the U.S. strategic petroleum reserve.
"Oil prices have reacted extremely negatively and we believe ... that we have not seen the bottom of the oil price just yet," Rystad Energy's head of oil markets Bjoernar Tonhaugen said. "The potential loss of demand in March-April may dwarf anything the World has ever seen, just when OPEC+ producers open the floodgates of new supply to the market," he added.
Oil continues to be hit on both the demand and supply side. The coronavirus outbreak has led to softer demand for crude as people cut back on travel, for example, while a breakdown in OPEC talks means there could soon be a supply glut as Saudi Arabia gets set to ramp up production to a record 13 million barrels per day.
The move lower comes even after President Trump said Friday that the Department of Energy would purchase crude oil for the SPR in a bid to prop up prices.
"Based on the price of oil, I've also instructed the secretary of Energy to purchase at a very good price large quantities of crude oil for storage in the U.S. strategic reserve," Trump said Friday from the Rose Garden as he also declared a state of emergency.
"We're going to fill it right up to the top, saving the American taxpayer billions and billions of dollars, helping our oil industry [and furthering] that wonderful goal — which we've achieved, which nobody thought was possible — of energy independence," he added.
The government could begin purchasing oil as soon as two weeks from now, Reuters reported on Monday.
Again Capital founder John Kilduff said the move to beef up the SPR is a "fantastic idea" and in prior instances has "served the country well."
"Releases of supplies have served to short-circuit price rallies in the past, and this filling may well serve to ebb the current sell-off," he said.
But not everyone is as optimistic. Goldman Sachs said Sunday that it doesn't believe the administration's actions will be enough to offset oil's steep sell-off.
"Given the scale and strategic nature of the current global surplus, we believe that these SPR purchases will be insufficient to reverse the increasingly likely risk that prices fall below our 2Q-3Q20 $30/bbl Brent forecast to cash-costs," the firm said.
Last week the firm slashed its oil forecasts for the second quarter as tensions between Saudi Arabia and Russia escalated. The firm now sees U.S. West Texas Intermediate crude averaging $29 per barrel, with international benchmark Brent crude at $30 per barrel. Goldman's prior estimates were $42.50 and $47, respectively.
- CNBC's Michael Bloom contributed reporting.