While saying the falling global demand concerns began to get calm relating to the spread of the coronavirus, a striking price war began. Oil prices dropped about 30% on Monday following Saudi Arabia’s sharp reaction.
Brent crude futures were down $12.23, or 27%, at $33.04 a barrel by 0552 GMT, after earlier dropping to $31.02, their lowest since Feb. 12, 2016. Brent futures are on track for their biggest daily decline since Jan. 17, 1991, at the start of the first Gulf War.
After the disintegration of the group called OPEC + (consisting of other manufacturers including OPEC plus Russia), Saudi Arabia plans to increase its crude production to over 10 million barrels (bpd) per day in April. In other words, trying to punish Russia which is the second largest producer in the world, as it does not support the further production cuts proposed last week. Saudi Arabia weekend reduced April’s official sales prices for all crude oil products by $ 6 to $ 8 a barrel.
Saudi Arabia, Russia and other major producers had a similar struggle with the USA, which became the world’s largest oil producer because it doubled the production of flow from shale gas fields, between 2014 and 2016. However, the situation is different this time because there is already an actual collapse in oil demand due to the coronavirus. China’s efforts to reduce the coronavirus outbreak have worn out the world’s second-largest economy and restricted shipments to the largest oil importer.
The spread of the virus to other major economies, such as Italy and South Korea, and an increasing number of cases in the United States raised concerns that oil demand will drop this year.
In other markets, the dollar fell sharply against the yen. Asian stock markets fell sharply, and gold has peaked since 2013, as investors fled to safe shelters.