Oil prices plummeted around 30% on Monday after Saudi Arabia cut prices and announced plans for a dramatic increase in crude production in April, a report said.
Saudi Arabia’s move to start a price war comes after Russia balked at making the further steep output cuts proposed by Opec to stabilise oil markets hit by worries over the global spread of the coronavirus, said a Reuters report.
Brent crude futures were down $13.29, or 29%, at $31.98 a barrel by 0433 GMT, after earlier dropping to $31.02, their lowest since February 12, 2016. Brent futures are on track for their biggest daily decline since January 17, 1991, at the start of the first Gulf War.
US West Texas Intermediate (WTI) crude fell by $13.29, or 32%, to $27.99 a barrel, after touching $27.34, its lowest since February 22, 2016. The US benchmark is potentially heading for its biggest decline on record, surpassing a 33% fall in January 1991.
The disintegration of the grouping called OPEC+ - made up of OPEC plus other producers including Russia - ends more than three years of cooperation on supporting the market, most recently to stabilize prices under threat from the economic impact of the coronavirus outbreak.
Saudi Arabia plans to boost its crude output above 10 million barrels per day (bpd) in April after the current deal to curb production expires at the end of March, two sources told Reuters on Sunday.
“I think all forecasts are out the window,” said Jonathan Barratt, chief investment officer at Probis Securities in Sydney. “It seems like a race to the bottom to secure order(s).”
Saudi Arabia over the weekend cut its official selling prices for April for all crude grades to all destinations by between $6 and $8 a barrel.
Goldman Sachs cut its forecast for Brent to $30 for the second and third quarters of 2020.
In other markets, the dollar was down sharply against the yen, Asian stock markets were set for big falls, and gold rose to its highest since 2013 as investors fled to safe havens.
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