Oil prices crashed as markets opened on Monday, plunging by nearly 30%.
This follows Saudi Arabia cutting its official selling price (OSP), after a pact with Russia to cut supplies collapsed.
Over the weekend, Saudi Arabia cut its OSP for April, for all crude grades to all destinations. Prices dropped by between $6 and $8 per barrel.
Russia, the world’s second-largest producer, refused to agree on supply cuts proposed by the Organization of the Petroleum Exporting Countries (OPEC) aimed at addressing the economic fallout from the coronavirus (Covid-19) outbreak.
According to figures from Reuters, Brent crude was down by as much as $14.25 to $31.02 a barrel. Meanwhile, US West Texas Intermediate (WTI) futures fell by $11.28, to $30 per barrel.
Reuters quoted risk consultancy Eurasia Group as saying: “Saudi Arabia and Russia are entering into an oil price war that is likely to be limited and tactical.
“The most likely outcome of this crisis is entrenchment into a painful process that lasts several weeks or months, until prices are low enough to … some form of compromise on resumed OPEC+ production restraint.”
The news agency cited two sources as saying that Saudi Arabia plans to hike its crude oil production significantly above ten million barrels per day (bpd) in April, after the expiry of OPEC’s supply cut deal with Russia by the end of this month.
Meanwhile, American investment banks Goldman Sachs and Morgan Stanley have cut their Brent price forecasts citing the oil price war between Russia and Saudi Arabia.