Benchmark U.S. oil prices plunged to below $30 a barrel early on Monday, while Brent Crude crashed by 10 percent, as the markets were spooked, rather than calmed, by the?

Benchmark U.S. oil prices plunged to below $30 a barrel early on Monday, while Brent Crude crashed by 10 percent, as the markets were spooked, rather than calmed, by the Fed cutting rates to near zero as the coronavirus pandemic threatens to wipe out a larger chunk of oil demand than previously thought.

At 9:00 a.m. EDT on Monday, WTI Crude was down 8.38 percent at $29.07, while Brent Crude plunged 9.93 percent to $31.92.

Oil prices hit their lowest since 2016 as a growing number of countries in Europe went into lockdown with borders closed and flights canceled, suggesting that oil demand will drop even more than analysts had predicted just a few weeks ago.

U.S. President Donald Trump declared national emergency over the coronavirus outbreak on Friday, which managed to lift oil prices, but just for a few hours, as it turned out.

The Fed rate cut may have also added to the market's fears because of the cut due to slowing economic activity.

On Sunday, the U.S. Federal Reserve slashed rates to 0 to 1/4 percent, expecting the effects of the coronavirus ?to weigh on economic activity in the near term and pose risks to the economic outlook.?

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?The Committee expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals,? the Fed said.

Commenting on the Fed move and oil prices this morning, ING strategists Warren Patterson and Wenyu Yao said:

?Clearly the oil market has ignored the emergency rate cut from the US Fed over the weekend. The breakdown in the OPEC+ deal could not have come at a worse time, with the market already having to deal with a demand shock.?

With the coronavirus pandemic weighing on oil demand, and with the Saudi-Russian oil price war, the global glut in H1 2020 would jump to the highest level ever recorded ? that is two to nearly four times bigger than the biggest surplus recorded so far, according to IHS Markit.

By Tsvetana Paraskova for Oilprice.com

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