Oil Price Plunge: $30 A Barrel Level In Danger Of Falling Amid Coronavirus, Saudi - Russia Spat

Crude oil futures were poised to break through the $30 level Thursday, taking a more than 7% plunge as U.S. equity markets dove further into bear territory, the coronavirus invaded Europe and the price war flared between Saudi Arabia and Russia.

In morning trade crude oil futures were off 7.5% to $30.54 a barrel. Brent crude was off 7.26% to $33.19 a barrel. By 11:30 a.m. EDT they had recovered slightly to $31.03 a barrel for crude and $33.34 for Brent.

President Trump's ban on nearly all travel from Europe aggravated an already rocky situation.

"Taking the view that the president's travel ban has only further heightened the likelihood of a global recession... investors fled," Connor Campbell, market analyst at Spreadex trading group, told AFP.

This week’s plunge in prices was the worst since the 1991 Gulf War as demand dropped in the wake of coronavirus quarantines that have restricted travel and weakened global economic growth. To compound the problem, Saudi Arabia and Russia threatened to up production by at least 1.5 million barrels a day to depress prices in a bid to pressure U.S. shale oil producers who need $40 a barrel to break even, worsening an already present oil glut.

Russia refused to go along with OPEC plans to reduce production to put a floor under prices, prompting Saudi Arabia to cut prices in retaliation. And the situation may get worse. The current OPEC agreement expires April 1, meaning countries will be able to pump as much oil as they want without a new deal.

That’s bad news for U.S. oil and gas companies, which have $18 billion in debt maturing in the next three months. Most of that debt is junk status, which means interest rates around 10% for refinancing.

''This is going to undermine global investment sentiment over the next couple of months; the best-case scenario would be a flat line for GDP growth in the U.S.,'' David Dismukes, head of Louisiana State University's Center for Energy Studies, told the Baton Rouge Advocate.

Rajiv Biswas, Asia Pacific chief economist at IHS Markit, told CNBC all this jockeying is good news for India, which imports 80% of its total energy consumption, bolstering profitability in certain sectors of the economy.

“A prolonged spell of low oil prices will support discretionary purchasing power [in India],” economist Radhika Rao told CNBC.

An analyst at Eurasia Group estimates that for every dollar oil prices drop, India saves $1.5 billion. It’s total bill for April through December was $95.69 billion, 12% lower than in the preceding fiscal year, which begins April 1.