Global oil prices faced a historic downfall late Sunday since 1991 after the Kingdom of Saudi Arabia launched a price war against former oil partner Russia. The oil prices of the United States crashed as over as twenty-seven percent to a past four-year low of $30 per barrel as traders gave support to KSA to flood the oil market with crude in a try to capture the market share again.
Recently, crude was trading down to $32 per barrel, about twenty-two percent. The global benchmark, Brent crude, also jumped twenty-two percent to $35 per barrel. According to Refinitiv, both oil agreements are facing their worst day since 1991. The chaos raised after the collapse of the alliance of the oil between the Organization of the Petroleum Exporting Countries (OPEC) and Russia on Friday.
Russia declined to proceed with the efforts of OPEC to save the coronavirus-beaten oil market by decreasing production. Because of the Vienna meeting failure, the oil industry shell-shocked, glowing a ten percent fall in oil prices on Friday. World oil prices already caught in a bear market due to the worldwide coronavirus outbreak that caused the crude demand to drop rapidly.
However, Saudi Arabia worsened the situation over the weekend. According to analysts, the kingdom cut its official April selling prices by about $6 to $8 in an effort to retake the share of the market and put pressure on Russia. Director of commodity research at ClipperData, Matt Smith, said that the KSA looked to open the stoppers and fight for a share of the market. Saudi Arabia is getting ready for a price war in the oil market.
One-day biggest percentage drop of US oil prices
According to the statistics of Refinitiv, the century’s biggest single-day drop percentage for the United States oil prices occurred in September 2001. The analyst said that the refusal of Russia to lessen the oil production amounted to target the shale oil producers of the United States, several of them need higher prices even to survive.
Whereas, the oil crash of 2014-2016 caused several oil and gas firms to file for economic failure and countless layoffs. Yet, the shale industry of the United States arose stronger from that period, and the U.S. would finally become the top oil producer of the world. Head of worldwide commodity strategy at RBC Capital Markets, Helima Croft wrote in a note to clients on Friday that the risks of playing a game of brinksmanship with Putin proved dramatically.