Ever since the U.S. war in Iraq which was held in the year 1991, the oil markets have crashed the most, around more than 30 % after the disintegration of the Opec+ alliance caused an all-out price war among Saudi Arabia and Russia, which are considered to be the biggest producers in the world. It all seems to be likely to have sweeping political as well as economic consequences.
In one of the most intense bouts of selling ever, Brent futures have now suffered by 31%, which is the second-largest decline on record after the open of trading in Asia on Monday after being suffering their biggest loss already since the worldwide financial crisis at the end of the previous week.
The global oil benchmark has been now falling to as low as $31.02 a barrel, Goldman Sachs Group Inc., on the other hand, has warned prices may possibly drop to near $20 a barrel in coming future.
The cataclysmic downfall is also going to resound through the energy industry, from giants such as Exxon Mobil Corp. to lesser shale drillers located in West Texas. It is also going to hit the budgets of oil-dependent countries from Iraq to Nigeria and may possibly also reshape worldwide politics, wear down the effect of nations such as Saudi Arabia. The battle against change in climate may also suffer a setback as fossil fuels turn into further more competitive contrary to renewable energy.
Andy Lipow, who is president of Houston-based energy consultancy Lipow Oil Associates LLC said, “It’s unbelievable, the market was astounded by a wave of selling at the open,” said
He added Opec+ has undoubtedly surprised the market by “engaging in a price war to gain market share.”
Knocked by downfall in demand because of the coronavirus, the oil market dropped deeper into chaos on the outlook of a supply free-for-all. Over the weekend, Saudi Arabia reduced its official prices by the most in at least 20 years as well as nodded to consumers it would slope up output — a clear-cut statement of intent to overflow the market with crude. In the meantime, Russia also said that its companies were free to pump as much as they could.
Chief Economist, Tim Fox, at Dubai-based lender Emirates NBD PJSC, stated in a Bloomberg Television interview that was held on Sunday, “It’s certainly a high-risk, high-stakes approach,”
He then further added, “The oil-price weakness is looking possible to extend and steepen, perhaps in coming weeks and months, except there is some policy coordination to bring that to an end.”
On the other hand, the oil prices have also suffered huge drops every time that Saudi Arabia has launched a price war in order to drive opponents out of the market. At the same time, West Texas Intermediate all fell down 66 percent from late 1985 to March 1986, it was that time when the country pumped at will among a renaissance of US oil output. For a short time, Brent crude dipped less than $10 a barrel when the kingdom had a head-to-head with Venezuela in the late 1990s.
