Oil prices crashed over 30 per cent on Monday, March 9, as investors fear oil war between Opec and Russia following the collapse of talks on production cuts on Friday.
According to Khaleej Times, WTI crude plummeted 31.5 per cent or $13 a barrel to $28.27 while Brent fell 28.5 per cent or $12.9 per barrel to $32.36 on Monday morning.
Analysts believe that further downward pressure on oil prices will stay, therefore, crude could test new lows again during the course of this week.
“A retest of 2016 lows ($27.88/b in Brent) would seem highly likely given the start of a new price war between Russia and Saudi Arabia. Forward curves have collapsed while downside risk premiums have jumped,” said Timothy Fox, head of research and chief economist at Emirates NBD Researech.
As reported by Khaleej Times earlier, analysts had said that oil potentially $30 a barrel became realistic after the statements issued by the Opec members for increasing the supply.
“An inventory blow-out in Q2 could lead to prices declining by more than 50 per cent year-on-year for average Brent that quarter (implying $33 a barrel on average) and struggling to improve considerably thereafter. The market-share strategy bears considerable risk for Opec producers as fiscal positions would deteriorate and balance of payments crises- and questions about the sustainability of monetary policy – re-emerge,” said Edward Bell, senior director for market economics at Emirates NBD Research.
“We expect to see Saudi Arabia, the UAE and other large producers in Opec increase production over the rest of 2020 as they return to a market-share strategy rather than price targeting,” he said.
James Williams, energy economist at WTRG Economics, told Market Watch that if Opec+ doesn’t reconsider their decision over the weekend, prices are likely to move into the $30s a barrel, but stay above $35.
Bjørnar Tonhaugen, head of oil markets and senior vice-president at Rystad Energy, projected that Coronavirus is poised to wipe out most of 2020 oil demand growth with February crude demand dropping by a shocking 4.67 million bpd, led by 2.9 million bpd month-on-month drop in Chinese crude runs. It has revised down its pre-coronavirus global oil demand growth forecast of 1.1 million bpd in 2020 to 500,000 bpd now if Covid-19 is contained by June 2020.