With oil prices sinking 60 per cent this year, one forecast sees Brent going as low as US$5 a barrel

Oil traders struggling to navigate one of the biggest oil crashes in history say the worst is yet to come.

Even after plunging about 60 per cent this year to the lowest since 2003, prices will likely drop further to US$20 a barrel or below, according to a survey of traders from some of the world’s biggest oil companies and merchants. Analysts from Goldman Sachs to Citigroup also expect prices to extend declines in the coming months, with some even speculating certain regional prices could go negative as markets try to send signals to halt supply.

Oil has been battered by the simultaneous fight against Covid-19, which is expected to reverse more than a decade of global demand growth, and a flood of supply as Saudi Arabia and Russia battle for market share. The sudden and severe plunge in oil prices has helped fuel the broader sell-off across markets, and threatens economies across Latin America and the Middle East, as well as the US, where the energy industry accounts for large chunks of both output and debt.

Picking a bottom in the crude market is always a stress-inducing enterprise when prices touch new lows daily. Brent dropped 13 per cent on Wednesday to settle at US$24.88 a barrel, the lowest since May 2003. There have been three double-digit percentage moves in Brent so far this month, tied with the Gulf War in January 1991 and the financial crisis in December 2008.

Eighteen of 20 oil and products traders surveyed by Bloomberg see Brent falling to US$20 a barrel or lower, with West Texas Intermediate seen US$3 to US$5 below that. The price weakness is expected to last from a matter of weeks to as long as the end of the year, said the traders, who aren’t authorised to speak publicly.

“The US$20 level is easily breachable” by mid-April, said R Ramachandran, a director at Indian oil refiner Bharat Petroleum.