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Russia and Saudi Arabia unleash oil price war
Russia and Saudi Arabia unleash oil price war

Black Monday on March 9, 2020 will be memorable by severe downturns in most global markets. Apart from the coronavirus pandemic, the oil trade war between Saudi Arabia and Russia triggered panic among investors. On March 9, oil prices suffered the sharpest intraday fall since 1991. In anticipation of the OPEC+ meeting scheduled for March 6, oil prices were developing a steady rally. Investors relied on the cartel and its allies to extend oil production cuts. Indeed, previously Saudi Arabia made a commitment to deeper output cuts and Moscow said that the deal "proved to be an effective instrument to ensure long-term stability on global energy markets." Nothing indicated the alarm. However, in practice, the high expectations were ruined. Russia rejected the proposal for further production cuts and withdrew from the pact. In response, Riyadh pledged to flood the market with cheap oil. Such a shocking outcome sent oil price into a tailspin. Brent crude slumped to $31.43 a barrel, West Texas Intermediate sank to $30.27. Both benchmark grades shed 31% and 28% respectively. Later in the week, oil prices regained some losses, but closed the week with the steepest drop in ten years. From April 1, 2020 OPEC and Russia will not be bound by any commitments. At present, Saudi’s Aramco makes a 4-6% discount on April contracts. Invoices for US buyers are issued with a bigger discount. So, market participants are braced for a full-blown trade war between the world’s largest oil producers.


Published: 2020-03-17 10:28:02 UTC
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