Oil extended losses on Monday as an emergency rate cut by the U.S. Federal Reserve failed to soothe global financial markets panicked by the rapid spread of the coronavirus while a price war rages on between top producers.

Brent crude (LCOc1) fell $1.13 to $32.72 a barrel by 0230 GMT, tumbling after last week's plunge of 25%, the largest weekly fall since 2008. The front-month price opened at a high of $35.84 but slipped to a low of $31.63.

U.S. crude (CLc1) was at $31.01, down 72 cents after slipping below $30 earlier in the session, despite U.S. President Donald Trump's pledge to fill strategic oil reserves in the world's largest oil consumer "to the top".

The U.S. Fed slashed interest rates on Sunday in its second emergency cut this month, and said it would expand its balance sheet by at least $700 billion in coming weeks in a bid to ease tension in financial markets.

Oil prices have come under intense pressure on both demand and supply sides: Worries about the pandemic slashing oil buying persist, while oversupply fears have grown after top exporter Saudi Arabia ramped up output and slashed prices to increase sales to consumers in Asia and Europe.

Earlier this month, the Organization of the Petroleum Countries and Russia failed to extend a production cut agreement which has been supporting prices since 2016.

“Fear remains the crux of the problem here as market players remain unconvinced that monetary policy easing and liquidity injections will solve an essentially healthcare crisis,” OCBC Bank’s economist Selena Ling said.

“The end-game to me remains not about more policy bazookas, but a peak in global COVID-19 infections and fatalities, and, or a COVID-19 vaccine cure in the horizon.”

Despite the massive drop in both oil and natural gas prices last week, the U.S. oil drilling rig count rose for a second week in a row to its highest since December, energy services firm Baker Hughes Co (BRK.N) said in its closely followed report on Friday. (RIG-OL-USA-BHI)

Still, the number of rigs is expected to fall as producers deepen spending cuts on new drilling.

More pain will be felt by U.S. producers as Brent's premium to WTI (CL-LCO1=R) is close to its narrowest since 2016, making U.S. crude oil uncompetitive in international markets. Exports are set to fall by 1 million barrels per day each in April and May, sources have said.

“The big loser will be U.S. shale, where the Republican government will possibly face a bailout decision on a heavily indebted industry sooner rather than later,” said Jeffrey Halley, a senior market analyst at OANDA in Singapore.

Reuters