Saudi Arabia rattled the already depressed oil market to its foundation early Monday after unilaterally slashing prices and promising to increase output, after deal with Russia collapsed.
The moves sent the prices of oil futures southwards, suffering their biggest daily loss since the Gulf War in 1991. The Saudis also triggered a price war with all players offering discounts.
Saudi Arabia cut its OSP(official selling price) for April for all crude grades to all destinations by anywhere from $6 to $8 a barrel, sending oil into a tailspin.
Brent futures fell $9.95, or 22.0%, to $35.32 a barrel by 6:34 p.m. EDT (2234 GMT), while U.S. West Texas Intermediate (WTI) crude fell $8.99, or 21.8%, to $32.29.
Those moves came after Russia on Friday balked at OPEC’s proposed steep production cuts to stabilise prices hit by economic fallout from the coronavirus.
Saudi Arabia said it plans to boost crude output above 10 million barrels per day (bpd) in April after the current deal to curb production between OPEC and Russia – known as OPEC+ – expires at the end of March, two sources told Reuters on Sunday.
Earlier in the session, both contracts fell to their lowest since February 2016, with Brent down to $31.02 per barrel and WTI at $30.
That puts Brent and WTI on track for their second biggest daily percentage drops in history behind declines for both in January 1991 over 30%.
Russian President Vladimir Putin announced earlier on Sunday that present oil prices were sustainable for the Russian economy. He said Russia has the tools to react to any adverse results of the spread of the coronavirus on the global financial climate.
“I want to stress that for the Russian budget, for our economy, the current oil prices level is acceptable,” Putin explained in a meeting with Russian energy officials.
According to some oil analysts, barrel prices as low as $20 are possible within the year.
