Saudi Arabia started a price war this weekend that has plummeted crude oil prices more than 30 percent at one point, sliding the most since the Gulf War in 1991. The sell-off followed the collapse of Saudi Arabia’s oil-cutting alliance on Friday, according to the Financial Times.
It seems that Russia refused to make deeper cuts to production despite the sharp hit to demand due to the global coronavirus outbreak. The Saudis responded by raising their output and offering their crude at discounted prices – all this occurring despite the weakened economy and the threat of the coronavirus becoming a global pandemic.
“The signal is Saudi Arabia is looking to open the spigots and fight for market share,” said Matt Smith, director of commodity research at ClipperData, reports CNN News. “Saudi is rolling up its sleeves for a price war.”
Analysts are saying that Russia’s refusal to cut production amounted to a slap in the face to US shale oil producers, many of which need higher oil prices to survive.
“Russia has been dropping hints that the real target is the US shale oil producers because it is fed up with cutting output and just leaving them with space,” analysts at energy consulting firm FGE wrote in a note to clients Sunday. “Such an attack may be doomed to failure unless prices remain low for a long time.”
Global stocks also take a beating
With the oil crash and the coronavirus staring traders in the face, S&P 500 futures plunged as much as 5 percent Sunday evening, triggering a limit that prevents futures from trading below that mark. Dow (DJI) futures fell more than 1,000 points or about 4.2 percent. Nasdaq Composite (COMP) futures were down 4.5 percent.
Asian Pacific markets have fared no better today, with Australia’s S&P/ASX 200 dropping 5.9 percent on Monday, putting the index on pace for its biggest plunge since October 2008. Japan’s Nikkei 225 sank nearly 5 percent and was last below 20,000 points
Bloomberg is reporting that Norway’s krone slid to its weakest against the dollar since the 1980s. Mexico’s peso fell as much as 6 percent, to the weakest since the aftermath of border-wall advocate President Donald Trump taking office, while the Canadian dollar dropped 1.3 percent against the U.S. dollar.
At 10:35 p.m. EDST, Dow Jones Futures at 24652 -1137 – down 4.41 percent.
