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Oil prices plunged more than 26%, after OPEC failed to strike a deal with its allies regarding production cuts.
As a result, Saudi Arabia slashed its prices as it reportedly prepares to ramp up production, potentially leading to an all-out price war.
U.S. West Texas Intermediate crude dropped 27.62% to $29.88 per barrel as of 06:33 GMT March 9th, having earlier tumbled to a low of $27.34 per barrel. International benchmark Brent crude futures also plummeted 26.4% to $33.32 per barrel. Brent futures were down more than 30% at their lows.
“This has turned into a scorched Earth approach by Saudi Arabia, in particular, to deal with the problem of chronic overproduction,” Again Capital’s John Kilduff said. “The Saudis are the lowest cost producer by far. There is a reckoning ahead for all other producers, especially those companies operating in the U.S shale patch.”
On March 7th, Saudi Arabia announced massive discounts to its official selling prices for April, and the nation is reportedly preparing to increase its production above the 10 million barrel per day mark, according to a Reuters report.
The kingdom currently pumps 9.7 million barrels per day, but has the capacity to ramp up to 12.5 million barrels per day.
“We believe the OPEC and Russia oil price war unequivocally started this weekend when Saudi Arabia aggressively cut the relative price at which it sells its crude by the most in at least 20 years,” Goldman Sachs analyst Damien Courvalin said in a note to clients. “The prognosis for the oil market is even more dire than in November 2014, when such a price war last started, as it comes to a head with the significant collapse in oil demand due to the coronavirus,” the firm added.
Goldman cut its second and third quarter Brent forecast to $30 per barrel, and said that prices could dip into the $20s.
The announcement by Saudi Arabia followed a breakdown of OPEC talks in Vienna. On March 5th, OPEC recommended additional production cuts of 1.5 million barrels per day starting in April and extending until the end of the year.
But OPEC ally Russia rejected the additional cuts when the 14-member cartel and its allies, known as OPEC+ met on the next day.
The meeting also concluded with no directive about the production cuts that are currently in place but set to expire at the end of the month. This effectively means that nations will soon have free rein over how much they pump.
“As from 1 April we are starting to work without minding the quotas or reductions which were in place earlier,” Russian Energy Minister Alexander Novak told reporters Friday at the OPEC+ meeting in Vienna, adding, “but this does not mean that each country would not monitor and analyze market developments.”
Meanwhile, the ruble fell against the dollar to 72.5 and to the euro to 82.7 amid falling oil prices.
Oil quotes fell by almost 30% after the news that the OPEC + participants could not extend the agreement to reduce production.
This constitutes the biggest fall in oil prices since 1991, when there was a war in the Persian Gulf.
Saudi Arabia is attempting to punish Russia, the world’s second-largest producer, for not supporting the production cuts proposed last week by the Organization of the Petroleum Exporting Countries (OPEC).
Saudi Arabia, Russia and other major producers last battled for market share like this between 2014 and 2016 to try to squeeze out production from the United States, which has grown to become the world’s biggest oil producer as flows from shale oil fields doubled its output over the last decade.
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One of the effects of this so called “war” is that US shale oil will become not competitive. A “gift” for US as well.
Actually, shale is not profitable if oil stays below $40 and it seems like it may fall to $15-20 range. Alberta’s toxic polluting tarsands are fucked and that is the only good news out of this and also the collapse of the Saudis.
I said the same thing to the wife yesterday, Alberta is fucked now. I’m glad i never went there, alot did to make a quick buck, i choose to stay in the east.
Although I’ve read that shale’s break even is $60 /barrel, so there will be some US bankrupting coming soon.
US shale production is used as an economic/political tool…but is also a way to launder money. It’s difficult to say which is more valuable to them. Shale has been below profit margins for quite awhile. Strange that they have not all gone belly, huh?
for america this is nothing. they save own oil. this is important.
I worked in Fort Mac for a while. Alberta is a redneck dumbass shithole, you are lucky you did not miss much :)
in 2015 many us shale companys folded,also with noting as soon as Australian sacked the masonic deep state cable from the southern hemosphere prices suddendly dropped dramaticaly,more proof that nwo/tyranny control is in tatters as expect the trend to be either way russia is good enough to produce unlimited volumes,yet may also assist in other nations without the usa/cia having any say in matters whatsover,bring it on Russia!
What’s going to get the US is the indebtedness of the US Shale oil producers. In that light this isn’t an attack on US oil production but the US banking sector who are propping up shale oil producers.
The 2008 financial crisis has been papered over by printing money at low interest rates instead of actually dealing with the problem and the level of corporate, government and personal debt are at record levels.
US corporations have been hollowed out by stock buyback schemes. This, along with a bond market that pays out nothing is what’s driving the stock market bubble.
I believe the Russian strategy is to create a crisis in the financial sector by triggering default in the shale oil sector at a time when the stock market bubble is about to burst and the world economy is going into recession. This is like setting off a bomb in an oil refinery. The initial damage is minor but the cascading effects of the small explosion is devastating.
Nice explanation WN!
I agree with you :)
The article states :- ““The Saudis are the lowest cost producer by far.” This may or mey not be so, BUT The Saudi’s are spending circa $85 per barrel with average annual production volumes, in order to fund the bloated ruling class, weapons purchases , wars of choice and basic incomes of the masses.
The difference between the oil per barrel spot price and the $85 per barrel needed can only be made up via debt, theft from the rich who are out of favour and Aramco boondoggles. The partial Aramco floatation is now ‘under water’. :)
The Saudis produce little else than oil and terrorism.
Oil production income in Russia is dwarfed these days by a very diverse and integrated economy. The US Sanctions have, by necessity, been responsible for the rejuvenation of Russia.
The Rouble is ‘floating’ on the exchange markets, ergo a drop in the Rouble equates to more Roubles per barrel of oil. Because most of the spending by Russian citizens is in Roubles now, with very little debt in foreign currencies, the exchange rate decline is not a big problem unless a person wants a flashy German car etc.
This is the dumbass Americunt plan to weaken Russian and Iranian economies, but will backfire as their Saudi arselickers are far more vulnerable.
Nah, the U.S. doesn’t want that, their shake oil business is going belly up. That’s Russias middle finger for Trump for delaying North Stream 2. I’m pro Russian by the way, I would have done the same. Russian oil survives even on $15 a barrel, U.S won’t, especially shake oil needs a minimum price of $80 a barrel to be profitable. We are witnessing the start of the biggest economic collapse ever, it’s just the start… Russia has major gold and Fired Reserves so does China, they will survive it, maybe India too, Africa as well because they have nothing to lose. The U.S., EU and Japan will be toast tho. U.S. shale industry has never been profitable, and now they have to start paying back the loans they got in recent years to stay afloat, meanwhile they don’t even make enough profit to cover operation costs. It’s a $1+trillion bubble that us ready to burst, will be followed by a major stock market crash…
Russia gave USA the lifeline,but when usa lies their ass off being #1 Then do the opposite to they whom truly are world leaders,it’s about time they are left to do as they please with their lies and limited sanctions,it’s not like russia didn’t care for usa or sauds! Oh well,Trump has 6 months to use his magic wand,but to effect,he better start getting them criminals put to justice,because you know there will be alot of pissed of patriots if they see usa no show for justice,either way justice is calling seeking only the whole truth!
Not to mention the investments of pension funds and universities, et al …….. that will become worthless.
Touche, you guys are pretty cluey. Yes, it will have wider impact on all sectors.
This is Russia’s nuke to all of them. ;)
You know people forget that Russia despite all the propaganda is still a very diversified and resource rich techno superpower and it can afford the ups and down of energy prices.
Their sectors many funded by masonic templars + nwo banksters,well it won’t affect us at all,it will strike the fake,phoney and false economic sectors hardest!
Yes, that is another weapon of mass destruction waiting to explode and this time the US elite ‘White Helmets’ will also poison themselves.
The rehearsal was in Idlib. :)
Check this out Florian. It kind of puts things in a much clearer perspective. enjoy my friend. https://tomluongo.me/2020/03/06/russia-just-told-the-world-no/
Yes, the Luongo news site is always reasoned and factual, which is a rare quality these days.
The most important of all , is that such reasoned information is actually making Americans and others more aware of what is actually happening in the world. This has to be a positive, as I am sure you will agree.
The current ( and past, lol ) Western Libtard propaganda is so puerile and obviously dishonest, that I dread to think who actually recruited such blockheads.
It will also take the inflated housing markets to the bottom too when the real panic along with the coronabatbeer hits in gusto, the Americunt economy is a house of cards.
Australia is bad too ,but really this only hurts the banks and investors,not the established familys,buisness and other more significant sectors like natural gas, gold,uranium,coal mining industrys arguable world leading to top 4 (period) I have no symphathy for banks nor greedy people trying to ripp off others, 40% housing drop? I don’t care,not planning to sell the little mansion anyway! The rest is otherwise all stimulus,as long as the buisnesses keep one another afloat,without allowing such vauge corporations maniputating toilet paper etc,with the medias hysterias about corona toilet papers,either way we will survive ok, I hope other nations are ready for the hiccup,as long as we are aware and no,now is not the time to invest,save resources,see how it pans out,then buy!
I agree, we are past peak oil and there is lot of economic disruption coming thanks to the global rip off by the Bilderberg Jews and Goldman Sachs. No time in human history have such a few people controlled all the wealth and the income disparity in even OECD nations is becoming appalling.
If anything cheap oil is very good for the economy. Lower energy costs means both companies and consumers have more money to spend on other things. It’s high energy costs that hurt economies, and it has always been Saudi policy to keep the oil price just high enough so they can make the most profit while not hurting their consumers that much that they will start looking for replacement energy.
Maybe but for the producers its bad. Aside from that U.S. doesnt have much of a production economy left. Its mostly healthcare, transportaion, service sector…
USAs #1 Export is Boeing,hence the brusselspouts putting in german ceo to try to destroy boeing via bypassing official usa qc inspection standards on innovation! Next to boeing believe it or not is piggery exports,who would have thought pigs keeping usa economy alive?
Also inflated priced weapons for morons like Saudis, Emiratis and puppets including Australia. The F-35 flying junk is being forced on NATO arselickers.
It doesn’r help,then again lockheed martin another zombie parasite corporation! Seriously leaders ought reconsider dealing with this cia/branched/entity(period)
GMO piggy fed with GMO corn… Yum, yum…
Like that huh?
I never like pork anyway,since I a kid,yum?no upvote because I don’t think so.
I was ironic ;) Im Always ironic when I use… after the sentence.
Yes this is why I upvote for being ironic,but gmo pork yum well not specific,yuth’
USA’s #1 export is machinery, including computers for a tidy sum of $206 Billion. Aircraft is 4th at $136 Billion and vehicles are 5th at $133 Billion. Texas has a GDP of $1.6 Trillion produced by 27 million residents. Russia’s GDP is $1.7 Trillion produced by 143 million peasants.
Caterpillar is large, and Boeing, but most computers are actually made in China, are they not. Are you including military machinery?
Very impressive numbers however you’re looking at the wrong side of the balance sheet …. The USA has a negative trade balance of over $600 B, a total government debt (state local and national) that’s approaching 200% of GDP along with an insane level of corporate and personal debt ….. this is where the problem lies.
What the Russian move does is put huge financial stress on SA …. a country which is crucial to the US petrodollar, which is the only thing that allows the USA to print money when they have such a staggering debt load.
It also puts stress on the shale oil producers and their banks, which aren’t a going concern at $60 bbl let alone $30 and it puts stress on the stock market at a time when consumer and business spending is in recession.
The US supply side is fine …. people want to buy US goods although this year is going to be a terrible year for air travel which will negatively affect Boeing and arms sales to gulf states will fall with oil sales. Apple is going to get stung by supply chain problems and the financial sector is going to be in for a terrible run. Hopefully droughts and bad weather won’t affect US agriculture too badly this year …… and China follow through on their promise to buy $30 B in soybeans (Yes Sir Mr. President pigs can indeed fly)
You obviously don’t know jack about the US economy!
Or maybe I do, and you should insert your Tampax…;)
You obviously know nothing about Russia
Bill gets his news from the BBC, CNN and Bellingcat. :)
I look forward to the crash. Sanity has to be imposed on the West , that has behaved like a drunkard with dementia for many decades.
USA ARE NOT TOP 12-15 OIL PRODUCERS INFACT RUSSIA IS THE REAL DEAL #1 AS NOW IS THE TIME YO PUT THE SAUDS AND USA TO THE REAL ACID TEST COME PUSH TO SHOVE,THE HALF FAKE STORY CONTRADICTS SAUDS PUNISHMENT WHERE IN REALITY RUSSIA #1 CALL THE SHOTS For the life of me,how long do these liars think they can get away with making out russia is weaker? Well let’s just see then shall we,my moneys on the demise of the petro dolla,see china and russia have not even used their more effective means of counterance to the much outdated and invalid cia nemesis!
I never understood this stuff that well, I wish I did tho, I understand military stuff much better
Neither did I untill i saw petrol % $1.95 pl drop to 89c pl,then began to look into geopolitics and events,in reality russia are the real good guys,where as usa are the vile rippoff merchant mobs!
Yea I knew that lol
Looking at your flag,yeah I thought so.
It’s just market forces at play (supply & demand). A milder Winter created a glut of fuel supplies then the outbreak of the coronavirus has reduced demand for oil, causing the price of oil and NG to drop even further. Saudi Arabia wanted OPEC members and affiliates to reduce their production in order to raise the price of oil back to it’s previous profitable level. OPEC reduced their production in 2019 to maintain prices but Russian producers didn’t then nor want to today, which has hacked off Saudi Arabia enough to start a price war to force the Russians to wise up.
less money for stolen syrian oil then as well for yank pigdogs. it’s not all bad.
this will be used as a reason for electric vehicles justifying more wars in africa tho so NATO gets equipment that doesnt entirely run on oil
Electric powered NATO tanks will be wonderful on a real battlefield when the battery runs out
:)http://i.ebayimg.com/images/g/XaAAAOSw2XFUaT8b/s-l300.jpg
The Saudis are screwed. They can’t afford $20 a barrel oil. They have tremendous costs to cover at home, not to mention a war gone south in Yemen. They are all baked this time, all of them.
95% of their illiterate lazy Bedouin population is on some sort of state subsidy and they are already running a $35 billion deficit with dwindling Forex and asset reserves.
every natural born Saudi camelrider gets 2000USD per month and nose for his family…. housing is cheap, health care is free… so then, much luck with low oil prices)))
And with the financial decline in the KSA, will be the decline in weapons sales from the USA. :)
In Serbia ONE liter of diesel costs 160 dinars that is 1,35 euros or 1,5 $. Our traitorous president and government keep stealing from us.
Never liked the EU arsekisser Vucic.
How does this compare to other eu?quote is equal or a tad more than the highest I seen in oz, ever!
UK is about £1.2 per litre of diesel today. About 1.3 Euros I think.
Weaker the country, higher the price. Austria and Germany has lowest fuel costs in EU, the other Eastern European countries are paying for them. Check the prices at the pomp for OMV in Austria versus Slovakia, Slovenia, Czech Republic, Croatia, Romania, Moldova, Bulgaria and Serbia.
Looks like China and the US are loving this price cut they are buying oil like no tomorrow US wants to literally milk this cow dry.
Punishing Russia with this move? I don’t think so. Apart from punishing every oil producing country, this will primarily hit the US shale oil producers!
Your comment must have hit a nerve with the ‘Guest’ trolls:)
Lol! As someone below mentioned, the stolen Syrian oil will also become less profitable.
the “big” chessmaster Putin once again has doing the math yourself.
he was not at will to decrease the production, the gulf countries has shown russia, where is its plce- /hint: in the corner/
russia will collaps at so low prices.
Do not forget ruble devaluation helps budget oil sold in Dollars