Russia Fires the First Shot to Start the Price War, Oil Plunges 30% to $30s/bbl

Oil prices plummet 30% to trade around $30s/bbl in early trading on Monday, March 9, 2020, after OPEC failed to reach an agreement with Russia in oil production cut last Friday, while the latter was reported to pump oil output after the deal expires at the end of this month, sparking fears across the globe of a price war.

 

In the morning session, Brent Future plunged 30% to $31.02/bbl, the lowest level since February 2016. Meanwhile, WTI slumped 27% to $30/bbl, the lowest level since February 2016 as well.

 

“We have made this decision because no consensus has been found of how all the 24 countries should simultaneously react to the current situation. So as from April 1, we are starting to work without minding the quotas or reductions which were in place earlier but this does not mean that each country would not monitor and analyze market developments,” said Russian Energy Minister Alexander Novak to reporters after the meeting on Friday.

On Friday, Brent plunged 9.43% to trade at $41.57/bbl on Friday while WTI remained unchanged at $45.27/bbl.

 

Later on Saturday, Saudi Arabia, the second oil producer after the U.S., announced massive discounts to its official oil selling prices for April, and it was reportedly preparing to hike the production beyond 10 million barrel per day (bpd).

Saudi currently produces 9.7 million bpd, but the actual capacity of the country can pump up to 12.5 million bpd.

 

Goldman Sachs cut its second and third quarter Brent forecast to $30 per barrel, while stating that prices could fall into the $20s.