Market witnesses biggest drop since 1991 after Gulf kingdom slashes selling prices over Russia rejection of OPEC-proposed production cuts
Oil prices fell by almost 30 percent on Monday, the most since 1991, as Saudi Arabia started a price war with Russia over Moscow’s refusal to submit to OPEC-proposed production cuts.
Brent crude futures fell by as much as $14.25, or 31.5 percent, to $31.02 a barrel, reported Reuters, noting that it was the biggest percentage drop since Jan. 17, 1991, the start of the first Gulf War. U.S. West Texas Intermediate crude also 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.
According to experts, the current cratering of the oil market is attributable to Saudi Arabia, the world’s biggest oil exporter, which is attempting to punish Russia for rejecting last week production cuts proposed by the Organization of the Petroleum Exporting Countries (OPEC).
OPEC and other producers supported the cuts to stabilize 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 expires at the end of March, two sources told Reuters on Sunday. “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 added.
Saudi Arabia launched its opening salvo in the war by cutting its official selling prices for April for all crude grades to all destinations by between $6 to $8 a barrel. The crisis has already had a fallout on major energy giants, with BP down 25 percent in trading on Monday afternoon, and Shell being down 20 percent.