New York (CNN Business)The great oil crash of 2020 ain't over yet.
US crude plunged nearly 7% and finished at an 18-year low of $20.09 a barrel Monday as the coronavirus pandemic continues to deal a devastating blow to energy demand.
At session lows, oil touched $19.27 a barrel -- the weakest intraday price since February 2002.
Brent crude, the world's benchmark, tumbled as much as 13% and fell to as low as $21.65 a barrel, its lowest point in 18 years. Brent settled at $22.76 a barrel, the lowest close since November 2002.
The renewed selling in the oil patch underscores the unprecedented collapse in demand caused by the social distancing restrictions imposed by governments around the world. Highways are empty. Entire airlines are shutting down. Macy's (M) just furloughed a majority of its 125,000 workers. Factories large and small have halted production.
Global oil consumption will likely crater by 12 million barrels per day this quarter, or 12%, the steepest decline ever recorded, according to Bank of America.
"It is very ugly and there is no way to sugarcoat it," Bank of America commodity analysts wrote in a Monday note to clients.
At the same time, Saudi Arabia and Russia are flooding the world with excess oil -- at exactly the time when the opposite approach is required. That price war is exacerbating the pain in the oil market.
Those two factors have driven US oil prices down by a stunning 68% since the recent peak of $63.27 a barrel in early January.
US gasoline demand could collapse by more than half
The selling comes after President Donald Trump, heeding the advice of health experts, extended federal social distancing guidelines until April 30. And Dr. Anthony Fauci, the nation's top infectious disease expert, warned on CNN the United States could see millions of coronavirus cases and 100,000 or more deaths.
That dire warning suggests the nightmare won't end anytime soon for the energy market.
IHS Markit estimates that US gasoline demand could collapse by as much as 4.1 million barrels per day -- or more than 50% -- during the coronavirus response period. That would easily surpass the demand destruction during the Great Recession.
And that's a big problem for oil because US gasoline is the No. 1 swing factor worldwide for oil demand.
Goldman Sachs head of commodities Jeffrey Currie called it the "largest economic shock of our lifetimes" and warned it is "extremely negative" for oil prices.
Sub-$2 gasoline prices
That shock has amplified the epic battle between Russia and Saudi Arabia.
First, Russia refused to cut production despite the obvious need for less supply. That refusal is driven by its desire to drown high-cost US producers in a sea of cheap crude in hopes of recapturing market share.
Saudi Arabia responded by threatening to ramp up production and slashing prices further still. That caused an historic collapse in oil prices -- exactly the opposite of what was needed to stabilize the shaken market.
Ordinarily, lower energy prices would be great news for American drivers, airlines and other energy consumers.
The average price for a gallon of gasoline has plunged to $2.01, according to AAA. That's down from $2.44 a gallon just a month ago. Several US states, including Texas, Ohio and Michigan, are now seeing prices at the pump below $1.75 a gallon.
Yet many Americans can't take advantage of cheap gas prices because of the severe travel restrictions imposed to fight the coronavirus pandemic. Most people are working from home, and few are taking road trips.
Likewise, airlines -- whose profits generally increase when oil is cheaper -- have canceled thousands of flights, and some like EasyJet in Europe have grounded flights altogether.
Trump to the rescue?
The oil crash has left Trump in an awkward spot.
On one hand, he's long been in favor of cheap energy prices for consumers, and Trump has never been shy about bashing OPEC for not pumping more.
Yet the oil crash, combined with excess production, threatens to bankrupt US shale oil companies and wipe out tens of thousands of oil jobs -- many in Republican-leaning states. That's why Trump has said he might eventually get in the middle of the oil dispute between the two nations.
In fact, Trump said Monday on a call to Fox News that he planned to raise the issue with Russian President Vladimir Putin.
"Right after this call, I'm speaking to a gentleman named Vladimir Putin," Trump said, adding that both Russia and Saudi Arabia "went crazy" about oil.
A readout of the call from the Kremlin said the two presidents agreed to hold talks on the state of the oil market at the ministerial level.
Resolving the oil war can't stop the crash, however.
"Now the question is: Can the US and OPEC save this market? The demand shock has become so large that they can't do it alone," Currie, the Goldman Sachs analyst, wrote.
He added that even a global production cut -- an outcome that "appears impossible at this point" -- would be "too late to stop the current surplus."
Only the end of the coronavirus crisis can stop that.
