Oil prices jumped as high as 30% following the failure of OPEC deal which flickered price war. OPEC had refused to make a deal with its associate on production cuts which pushed Saudi Arabia to slit and reduce its prices. It was gathered that Saudi Arabia puts plans in place to increase its firm production ahead of the expected increase in demand for the product.
This is building up fear as people believe it might lead to an all-output price war. Things also don’t look good for U.S. West Texas Intermediate crude as it is set to hit its lowest day since the last one in January of 1991. And also hit its second-lowest day after jumping or skyrocketing from 22%, or $9.15, to trade at $32.13 per barrel.
Brent crude oil who seems to be on its way to its lowest day also jumped from 6% to $33.49 a barrel. Stock markets are also affected by this, already shaken by the coronavirus outbreak. Markets in Asia jumped on Monday during trading, US futures also experienced a huge decline. As seen in Europe, the FTSE 100 (UKK) jumped 8.5% with BP (BP) reduced by 20%.
Germany, on the other hand, had its DAX (DAX) reduced to 7.4% while Italy’s major index fell to 7%. Following the announcement made by Saudi Arabia on Saturday, there would be a huge discount on its April official selling prices. Saudi Arabia which originally produces 10 million barrels per day is looking to produce more, to romp-up production.
As gathered, Saudi Arabia has the capacity to increase production to around 12.5 million barrels in one day. On Friday at a meeting in Vienna, Russia blatantly refused to move along with OPEC on its track of rescuing the Oil market thumped by the coronavirus outbreak. The deadlock left the oil industry totally confused and shocked which flickered a 10% increase in the prices of oil that Friday.
The huge discount on Saudi Arabia’s April official selling prices is a destructive move. According to the director of commodity research at ClipperData, the situation looks more like Saudi Arabia is looking to wrestle for market share and also preparing for a price war. Matt Smith stated.
According to the analyst, the refusal of Russia to corporate and cut production is a deliberate jab on the US Shale Oil producers. According to analysts at energy consulting firm FGE, Russia is obviously tired of being left with space after cutting output. However, their refusal might lead to doom. This can only be averted if prices remain low for the longest time.
