Oil prices plunged over 30% on Monday (March 9) suffering the biggest decline since the 1991 Gulf War, following a collapse in talks between Saudi Arabia and Russia at the OPEC+ meeting in Vienna last week.
Prices for Brent crude futures, the international benchmark, plummeted 29.07% to $32.11 per barrel after dropping 30% earlier. US West Texas Intermediate (WTI) crude futures were down 30.98% to $28.49 per barrel. After paring some losses, Brent and WTI remained down about 20%.
On Thursday, OPEC proposed to further reduce production by 1.5 million barrels per day starting in April until the end of this year. However, Russia opposed this proposal when the 14-member cartel and its allies, known as OPEC+, met on Friday. Russia, in particular, insisted on the extension of the current agreements only for the second quarter.
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.
On Saturday, Saudi Arabia announced massive discounts to its official selling prices for April, and the nation is reportedly preparing to increase its oil production above the 10 million barrel per day mark, once again fanning fears of oversupply amid a sharp decline in global demand.
Oil prices have already moved sharply lower this year. In its monthly report, the International Energy Agency warned that global oil demand was set to contract in 2020 for the first time since 2009. The agency slashed its base case demand forecast by almost 1 million bpd, signalling a contraction of 90,000 bpd.
Stocks worldwide are tanking
Oil companies were crushed on Monday morning, in reaction to the sharp drop in Brent prices. Shares of oil giant Saudi Aramco were down 10% to 27 riyals per share at 08:00 am CET. Royal Dutch Shell's stock traded 21.89% lower to sell for £12.50 at 9:49 am CET. In Romania, shares of OMV Petrom, the most valuable company listed on the Bucharest Stock Exchange, fell 24%.
Financial markets are thrown into turmoil following Saudi Arabia's response to the collapse of OPEC+ .
Asian shares crashed amid selling across the board. Japan's Nikkei 225 Index ended down 1,050.99 points, or 5.1 percent.
Australia's benchmark S&P/ASX 200 Index slumped 7.3 percent, to 5,760.60, suffering its worst one-day percentage point slide since the global financial crisis, as $136 billion was wiped from the local bourse.
European stocks as measured by the Stoxx Europe 600 Index plunged to enter bear market territory amid the global selloff. Italy’s FTSE MIB proceeded to fall by more than 9.7% early in the session.
US stock futures tumbled with the S&P 500 futures indicating a 5% drop at Monday’s open.
Some strategists see oil prices crater to $20 this year. Goldman Sachs cut its forecast for Brent to $30 for the second and third quarters of 2020.
Meanwhile, Russia's Finance Ministry announced on Monday that the country can manage to keep the economy stable for the next 6-10 years if oil prices drop to a $25-30 per barrel range due to a total of $138.8 billion in its National Wealth Fund.