This has been an absolutely brutal couple of weeks for oil markets. Crude oil futures have fallen every trading day for more than a week. If Friday's sell-off continues -- Brent crude futures were down 3.3% in afternoon trading -- oil will have fallen 15% in only eight days. Prices are now on course to fall below $50 per barrel for the first time since 2017. 

The ongoing bearishness in the crude market has been fueled by the international spread of the COVID-19 coronavirus. Energy industry experts now expect global oil demand will fall this quarter as a result. Stock markets are slumping too -- the S&P 500 index and Dow Jones Industrial Average both fell by more than 10% in record time over the past week on increased fears that the global economy is headed for recession. Over the past week, the SPDR S&P Oil & Gas Explorer & Producer ETF (XOP -0.69%) has declined by 19% and is near its all-time low.

Stacks of oil barrels outside an industrial facility.

Image source: Getty Images.

This slackening of demand could hardly have come at a worse time for the oil and gas industry. Oil markets were already in a state of oversupply this year as output from U.S. shale has grown much faster than demand was expected to.

Since Brent crude futures peaked in early January at just under $70 per barrel, they have dropped 26%, and there's substantial risk that they will keep declining, given the current conditions of oversupply and falling demand. 

Saudi Arabia pushes for a big OPEC cut

Saudi Arabia, the world's second-biggest oil producer behind the U.S., has reportedly floated a proposal to stop oil's free fall that it plans to put before its fellow OPEC members at the organization's next meeting. It would ask the group, which controls about 40% of global oil production, to cut its combined output by 1 million barrels per day.

That's more than twice as large as the 400,000 daily barrel cut that was proposed in early February, but the tightening of supply is viewed as a necessity given the fears that demand will crater as more countries take actions to impede the spread of COVID-19. 

This isn't in any sense a novel tactic for OPEC. The consortium's members have agreed to cut output a number of times in recent years to stem oil price declines and reestablish some certainty in the markets. Based on Friday's sell-off, however, fear and uncertainty have the upper hand for now.