The Saudi move, which was described as igniting a new price war in the oil market, and which coincides with global concerns about the continued spread of the Corona virus, and its potential impact on global demand, pushed the market to witness its worst days since the Gulf War.
By the end of trading today on the New York Stock Exchange, American “NYMEX” crude fell 25% to $ 31.13 a barrel, the second worst daily performance and the worst since 1991. In London, the global benchmark price, Brent, fell 24% to 34.36 dollars a barrel.
Last Friday, OPEC and OPEC + representatives were unable to agree on the timing of extending the current cut, or further reducing production, and the OPEC + negotiations ended without agreement, because Russia did not agree to an additional cut in production.
The Organization of the Petroleum Exporting Countries (OPEC) held talks with its allies on Friday after the organization told Russia and others that it was in favor of cutting production by an additional 1.5 million barrels per day until the end of 2020.
On Saturday, Saudi Arabia announced massive reductions in official selling prices for April, and Reuters noted that the kingdom was preparing to increase production to more than 10 million barrels per day from 9.7 million barrels, which was described as a “price war” after talks failed “OPEC +”.
For his part, said analyst John Kildoff of the company “Capital Capital” For a network CNBC: “The matter has turned to the scorched earth approach by Saudi Arabia, in particular, regarding the problem of overproduction.”
Goldman Sachs lowered its forecast for Brent crude prices during the second and third quarters of this year to $ 30 a barrel, with a possible drop at some point to $ 20.
And the International Energy Agency said, today, Monday, that the global demand for oil is heading for deflation in 2020 for the first time in more than ten years in light of the faltering global economic activity due to the Corona virus.
She added that she expects demand for oil to reach 99.9 million barrels per day in 2020, thereby reducing its annual forecast by nearly one million barrels per day and indicating a contraction of 90,000 barrels per day in the first decline in demand since 2009, according to Reuters.
And the agency, which is based in Paris, added that if the governments fail to contain the outbreak of the Corona virus, consumption may decrease by up to 730 thousand barrels per day.
For his part, a spokesman announced Iraqi Ministry of Oil, Asim Jihad, that Iraq is working to invite member states in OPEC and outside it, to reach an agreement that restores the balance of the oil market, before the end of the current agreement, by the end of this month, stressing that the decline in oil prices causes great damage, especially to the producing countries.
“It is in everyone’s interest to reach an agreement and to determine production levels in order to absorb the oil surplus in global markets,” Jihad stressed. Jihad also pointed out that “the Iraqi delegation made great efforts in bringing views between Russia and Saudi Arabia at the Vienna meeting a few days ago.”
The Algerian Energy Minister, Mohamed Arqab, announced today, Monday, that his country intends to hold consultations with other oil producing countries, after the failure of the Organization of Petroleum Exporting Countries (OPEC) to agree to reduce production.
Meanwhile, Iranian Oil Ministry spokesman, Kasrawi Nouri, considered that the failure of the “OPEC +” countries to reach an agreement at the recent Vienna meeting was very negative and not hoped for cooperation between the two parties.
He said in comments to the agency “Sputnik“The cooperation between the two parties has had a good effect over the past two years in maintaining his interests. Iran believes that the market needs to reduce supply to maintain balance in the current conditions. “
And about Russian position Energy Minister Alexander Novak said in a meeting with Prime Minister Mikhail Michussen that the consequences of the withdrawal from the “OPEC +” agreement have been studied, and the current market situation is within the expectations.
Oil prices have already fallen sharply this year as the outbreak of the Corona Virus lowered demand for crude. Potential oversupply could increase pressure on prices.
What brings to mind what happened in 2014 when Saudi Arabia, Russia and America competed for market shares, causing the oil supply to increase, and prices fell sharply. However, analysts expect Riyadh and Moscow to finally reach an agreement.