- Oil prices are down 30% for the year as the new coronavirus, COVID-19, slashes global demand forecasts.
- With previously-agreed OPEC+ production cuts expiring at the end of March, Saudi Arabia and Russia can theoretically pump as much crude as they want.
- International and U.S. oil benchmarks plummeted to multi-year lows on Friday, with Brent crude closing at $45.27, down more than 9%, and West Texas Intermediate down more than 10%.
Experts are calling dramatically lower crude prices as major OPEC and non-OPEC producers prepare for an all-out price war, in a sudden U-turn from previous attempts to support the oil market as the new coronavirus hammers global demand.Â Â
“$20 oil in 2020 is coming,” Ali Khedery, formerly Exxon’s senior Middle East advisor and now CEO of Dubai-based strategy firm Dragoman Ventures, wrote on Twitter on Sunday. “Huge geopolitical implications. Timely stimulus for net consumers. Catastrophic for failed/failing petro-kleptocracies Iraq, Iran, etc – may prove existential 1-2 punch when paired with COVID19.”
The comment came as oil prices are down 30% for the year and a day after Saudi Arabia announced massive discounts on its official selling prices for April. Plunging price forecasts are also coming amid reports of a possible increase in production by the OPEC kingpin from its current 9.7 million barrels per day (bpd) to more than 10 million bpd.
With previously-agreed OPEC+ production cuts expiring at the end of March, Saudi Arabia can theoretically pump as much as it wantsÂ â up to its capacity of 12.5 million bpd.Â And Russian Energy Minister Alexander Novak said Friday that essentially the wheels come off next month: “As from 1 April we are starting to work without minding the quotas or reductions which were in place earlier,” he told reporters at the OPEC+ meeting in Vienna, adding, “but this does not mean that each country would not monitor and analyze market developments.”Â
“Members look now to be preparing for a price war by announcing plans to actually increase output,” wrote Edward Bell, commodities analyst at Emirates NBD, in an analyst note Sunday. “The outcome is an astonishing reversal of what appeared to be a pending production cut to compensate for the decline in demand caused by the Covid19 (coronavirus) outbreak.”
International and U.S. oil benchmarks plummeted to multi-year lows on Friday, with Brent crude closing at $45.27, down more than 9%, while U.S. West Texas Intermediate sank more than 10% lower to $41.28, its lowest level since 2016.