Oil plunges about 30% to $31.02 per barrel after Saudi Arabia opens price war with Russia, hikes output as OPEC deal collapses
Saudi Arabia, the world’s biggest oil exporter, is attempting to punish Russia, the world’s second-largest producer, for balking on Friday at production cuts proposed by OPEC.
US West Texas Intermediate crude fell by as much as $11.28, or 27.4 percent, to $30 a barrel
OPEC and other producers supported the cuts to stabilise falling prices caused by the economic fallout from the coronavirus outbreak
Saudi Arabia has opened the war by cutting its official selling prices for April for all crude grades to all destinations by between $6 to $8 a barrel
Tokyo: Oil fell by the most since 1991 on Monday after Saudi Arabia started a price war with Russia by slashing its selling prices and pledging to unleash its pent-up supply onto a market reeling from falling demand because of the coronavirus outbreak.
David Lennox of Fat Prophets says cohesion between Saudi Arabia & #Russia has collapsed completely.
— CNBC-TV18 (@CNBCTV18Live) March 9, 2020
Brent crude futures fell by as much as $14.25, or 31.5 percent, to $31.02 a barrel. That was the biggest percentage drop since 17 January 1991, at the start of the first Gulf War and the lowest since 12 February 2016. It was trading at $35.75.
US West Texas Intermediate (WTI) crude fell by as much as $11.28, or 27.4 percent, to $30 a barrel. That was also the biggest percentage drop since the first Gulf War in January 1991 and the lowest since 22 February 2016. It was trading at $32.61.
Saudi Arabia, the world’s biggest oil exporter, is attempting to punish Russia, the world’s second-largest producer, for balking on Friday at production cuts proposed by the Organisation of the Petroleum Exporting Countries (OPEC).
OPEC and other producers supported the cuts to stabilise falling prices caused by the economic fallout from the coronavirus outbreak.
Saudi Arabia plans to boost crude output above 10 million barrels per day (bpd) in April after the current supply deal between OPEC and Russia, - known as OPEC+ - expires at the end of March, two sources told Reuters on Sunday.
Saudi Arabia, Russia, and other major producers last battled for market share like this between 2014 and 2016 to try to squeeze out production from the United States, now the world’s biggest oil producer as flows from shale oil fields doubled the country’s output during the last decade.
“Saudi Arabia and Russia are entering into an oil price war that is likely to be limited and tactical,” Eurasia Group said in a note.
“The most likely outcome of this crisis is entrenchment into a painful process that lasts several weeks or months, until prices are low enough to ... some form of compromise on resumed OPEC+ production restraint,” Eurasia said.
Saudi Arabia has opened the war by cutting its official selling prices for April for all crude grades to all destinations by between $6 to $8 a barrel.
China’s efforts to curtail the coronavirus outbreak has disrupted the world’s second-largest economy and curtailed shipments to the largest oil importer.
The spread to other major economies such as Italy and South Korea and the burgeoning cases in the United States has increased the concerns that oil demand will slump this year.
Major banks such as Morgan Stanley and Goldman Sachs have cut their demand growth forecasts, with Morgan Stanley predicting China will have zero demand growth in 2020 while Goldman is seeing a contraction of global demand of 150,000 barrels per day.
In other markets, the dollar was down sharply against the yen, Asian stock markets were set for big falls and gold rose to the highest since 2013 as investors fled to safe havens.
Rupee fell against the US dollar tracking weak domestic markets and a surge in crude oil prices
Russia asked Pakistan to first honour its commitment to the flagship project of the much-touted Pakistan Stream Gas Pipeline (PSGP) which will be constructed from Karachi to Lahore
Forex traders said weak domestic equities and foreign fund outflows weighed on the local unit and restricted the appreciation bias