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This is entirely new territory.

That’s the consensus from oil traders and analysts the world over this week, as oil plumbed 18-year lows on Wednesday amid a double hit to prices: the demand-shock of the coronavirus crisis, and the price war between Saudi Arabia and Russia, which has seen the kingdom flood an already oversupplied world with oil it doesn’t need.

“We haven’t seen anything like this,” said Jace Jarboe, a futures and options broker with Daniels Trading in Chicago.

“It’s mind-blowing,” said Bjarne Schieldrop, chief commodities analyst at SEB in Oslo.

“2020 has hit us like a fist,” wrote Gavin Thomson, vice chairman for energy in the Asia Pacific at consultancy Wood Mackenzie, in Singapore.

For the oil sector, the past two weeks have left an already volatile industry wondering where the bottom is, whether normality will ever return—and what comes next.

A tale of two shocks

Since late February of this year, oil prices have dropped by more than 50%, sinking to levels not seen since the early 2000s. On Wednesday, the Brent crude contract closed at $24.88 per barrel, its lowest price since May 2003. Meanwhile, the WTI contract closed at $20.37 per barrel, its lowest price since February 2002.

In the days since, oil has gained back some ground: On Thursday, oil futures rallied with a historic one-day jump, after U.S. President Donald Trump said he could intervene in oil markets, and on Friday, Brent was up 5.4% to $30.31 per barrel, while WTI was up 6.9% to $26.96 per barrel.

But markets remained down by about 50% since their recent highs in late February, and analysts were skeptical that Trump’s intervention could offer the market any long-term relief.

That’s due to a double shock in both supply and demand.

The supply shock began in early March, when, in an effort to punish Russia for its refusal to back OPEC production limits meant to keep prices near $60 a barrel, Saudi Arabia offered massive discounts to its customers, and soon after opened the taps and committed to releasing 13 million barrels a day on global markets. That’s an increase of 1 million barrels per day—equivalent to nearly the entire daily production of Scotland, a major North Sea producer.

“What we are seeing here is essentially the atomic bomb equivalent in the oil markets,” wrote Louise Dickson, an analyst at energy consultancy Rystad in Oslo.

But even as Saudi Arabia set off the supply shock, a demand shock was widening in the form of the coronavirus pandemic, which has kept millions at home across Europe and the U.S. and wiped out large swaths of demand for oil that would normally keep planes, cars, and businesses running.

Adam Rozencwajg, managing partner at G&R Associates, an investment adviser that focuses on the natural resources sector, says the initial price drop from $50 to $30 was “entirely the results of the price war,” but the continued slide earlier this week is due to the massive increase in reported coronavirus cases.

Even a few weeks ago, when coronavirus was already casting a pall over the oil sector’s annual gathering in London, few seemed to have imagined it would get to this point so quickly, says Christopher Haines, an oil analyst at Energy Aspects in London.

“I don’t think anyone imagined that firstly it would be so big, [or] that governments would undertake the kind of draconian shutdowns that they undertook in Italy,” he said. “I think that was a big underestimation by everyone…People are already realizing this year is a write-off.”

Brutal landing

The price plunge was already having a dramatic knock-on effect on oil companies’ spending and business planning, analysts say, and the first to be impacted is the U.S. shale sector—as Saudi Arabia intended, says SEB’s Schieldrop.

“It looks like a war between Russia and Saudi Arabia, yes,” he said. “They are not friends at the moment. But first and foremost this is about taking back market share from the U.S., and offshore producers.”

U.S. shale needs at least $40 per barrel to break even, according to analysts, while the breakeven price for new wells is around $50 per barrel. The price drop also came at a time when the sector was already at risk, with billions in debt coming due just this year, a marked difference from the last major price plunge, beginning in 2014.

“They’re not as vibrant as they were in 2014, and they’re going to decline in a much greater way today,” said Rozencwajg.

The price drop is resulting in nearly instantaneous production and spending cuts: In the hours after Saudi Arabia’s vow to flood oil markets, at least two shale companies announced immediate cuts. The result could be a near wipeout of the output surge that made the U.S. a new oil exporting superpower.

“Over the last 10 years, global oil demand has increased by 13 million barrels a day and 10 million of the 13 million has been from shale,” said Rozencwajg. “That is gone.”

Efforts to bail out the shale sector, warns Carsten Fritsch, a commodities analyst at Commerzbank in Frankfurt, are just as likely to make the price tank further, since the demand for that oil simply isn’t there.

“We are heading to a perfect storm with massive demand destruction, even greater than the crisis of 2009,” he said.

But the price drop is affecting companies worldwide, analysts warned, with real-world consequences for those working in the sector.

On March 13, Bernard Looney, the CEO of British oil major BP, said in a LinkedIn post that the company would reduce capital and operational spending, as it sent all employees other than those in critical roles to work from home.

Other companies that are reviewing or have already cut spending include Norway’s Equinor, Chevron, Exxon Mobil—the world’s largest publicly traded oil company—and even Saudi Arabia’s state-run Saudi Aramco, according to Reuters.

The impact will be felt for some time.

“Investment in exploration and development will be sharply pulled back in both national and private oil companies,” said Valérie Marcel, an associate fellow at London’s Chatham House and an expert in oil companies and development. “Layoffs and bankruptcies are expected.”

Pain today, more tomorrow

As oil prices have slid, few analysts are willing to predict a bottom.

Even estimates of the scale of the demand drop are subject to rapid changes: Norway’s Rystad now forecasts a 2.2 million barrel per day drop this year compared with 2019, a “shocking” (its word) revision to the consultancy’s estimate last week that oil demand would fall 600,000 barrels per day.

Meanwhile, Edinburgh-based Wood Mackenzie estimated on Thursday that the sector’s total spending, from upstream operations to dividends, would have to be cut by 41%—while buybacks will be suspended, and other shareholder distributions will need to be cut, “breaking a few promises to investors.”

Of course, even if the price war rages on, governments worldwide hope the spread of the coronavirus will be brought under control within months—enabling people to return to work, and flights and transport to resume, as is finally happening in China.

But once the world emerges from lockdown, it may look very different. The economic costs of the virus are already plunging the globe into a recession or even a depression, which would have longstanding impacts on oil demand. And new ways of working and living, including remote offices and limiting travel, have suddenly become the standard.

“Many of the changes individuals and organizations are making to the way they function—changes that are designed to adapt to a crisis—will not be reversed once the pandemic ends,” Marcel said.

“There will be some permanent demand destruction.”