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Oil Crashes as Saudi Arabia Fires Opening Salvo in Price War

Oil rates crashed by more than a quarter of their value, being on track on Monday to register their largest one-day decrease in almost 30 years. 

oil collapses after saudi arabia makes firfst step in price warPhoto: Reuters

The significant events have taken place in Vienna in the framework of the OPEC+ meeting that it is difficult to assess them right away – the consequences will be seen until the end of the year, when the deal to reduce production is canceled on April 1, as Russia and Saudi Arabia have not been able to agree.

The responses regarding the incident are very opposite.

There were the countries that benefited from the supply cut, the United States first and foremost with its shale oil. In addition, the United States and other countries outside the OPEC+ agreement, they were ready to increase oil production.

It was also added that even in the current conditions, a new agreement could be reached if the proposal was more compromise.

Meanwhile, it was announced that Saudi Arabia plans to increase oil supply in April up to 10 million bpd in contrast to March’s amounts, as according to report, the Kingdom’s crude production will reach 9.7 million bpd. There is opinion, that Saudi Arabia is ready, if necessary, to increase oil production up to 12 million bpd.

Experts interpret such a behavior as the desire of Riyadh to exert maximum pressure on the Russia to return to the negotiating table.

Recall, at the meeting on March 6, Russia and Saudi Arabia, for the first time over 3 years, could not reach an agreement. For this reason, Brent international benchmark for futures with delivery in May crashed by 22.95 percent, to touch $34,88 per barrel, while the U.S. WTI crude futures with delivery in April collapsed by 24.52 percent, to $31,19 per barrel at 0817 GMT.

The oil prices were under pressure because of the looming fears over crude demand slump, as the number of  coronavirus cases in South Korea, Italy and the U.S. was growing.

Meantime, Goldman Sachs and other banks, including Morgan Stanley have significantly slashed their oil demand growth forecast.

Source: Reuters