The price of Mexico’s export crude plunged almost 23% on Wednesday to its lowest level in 18 years.

The price for a barrel of Mexican crude closed at US $14.54 on Wednesday, a decline of 22.6%, or $4.24, compared to Tuesday.

The two main benchmark prices for oil, the West Texas Intermediate (WTI) and the Brent Crude prices, also fell on Wednesday albeit by less than Mexico’s export grade oil mix.

The financial group Banco Base reported that the WTI price closed down 17.1% at $22.33 per barrel, while the Brent price dropped 8.7% to $26.23 per barrel.

Banco Base said that oil prices started dropping as the result of the price war between Saudi Arabia and Russia but are now taking a hit due to the global spread of novel coronavirus Covid-19. Demand for oil is dropping as fear grows that the pandemic will trigger a global recession.

Despite falling demand, Russia has refused to cut its oil production and Saudi Arabia, the world’s second largest oil producer after the United States, ramped up its production in retaliation earlier this month.

Banco Base said that the United States has also increased its oil production to an all-time high of 13.1 million barrels per day last week.

Some analysts have said that the decline in oil prices places additional pressures on the already ailing finances of Pemex, Mexico’s heavily indebted state oil company, and could affect its credit rating. Its bonds are already rated as junk by Fitch Ratings.

Wednesday’s closing price for Mexico’s flagship crude is 73.6% lower than the price just two months ago, when a barrel was selling for $55.15.

Pemex based a cost-benefit analysis for future extraction at the Perdiz onshore field in Veracruz on the latter price but the oil sector regulator, the National Hydrocarbons Commission, has warned that the project will not be economically viable if crude prices remain low.

Source: Notimex (sp)