Oil prices suffered an historic collapse after Saudi Arabia shocked the market by launching a price war against onetime ally Russia.
US oil prices crashed as much as 34% to a four-year low of $27.34 a barrel as traders brace for Saudi Arabia to flood the market with crude in a bid to recapture market share.
Crude finished with a staggering loss of nearly 26% to settle at $31.13 a barrel. Brent crude, the global benchmark, plunged 24% to close at $33.36 a barrel. Both oil contracts suffered their worst day since 1991, according to Refinitiv. And they are both now at four-year lows.
The shock to oil also rattled stock markets, which were already in a panic because of the novel coronavirus outbreak. Markets in Asia plunged during Monday trading, while US stocks recorded massive declines.
Here is the reasons which happened recently for further downside movements apart from coronavirus
Oil prices took a dive on Friday (6.3.20) after Russia failed to agree with OPEC members on a cut to oil production. The cut was aimed to contain the plunge in the price of crude oil caused by the coronavirus outbreak's disruption to world business.
Russia is not a member of the Organization of Petroleum Exporting Countries (OPEC) but is a key fellow exporter and typically an ally to the group. Some members of OPEC insisted that non-OPEC allies, such as Russia, join in with production cuts.
Following the news, oil prices fell 10.1% to end at $41.28 (€36.50) per barrel when trading closed in New York on Friday. The price was $60 at the start of the year.
Trump to make deal for production cuts
The Saudis and Russians have reportedly agreed to cut their petroleum production by 3.3 million and 2 million barrels per day, respectively, in a bid to shore up global oil prices. Other members of the Organization of Petroleum Exporting Countries (OPEC) are supposed to cut an additional 5 million barrels by next month.
Owing to the free fall in the price of crude oil in the wake of the global COVID-19 pandemic, the price of regular gasoline at the pump in the U.S. now averages under $2 per gallon.
"Good for the consumer, gasoline prices coming down!," tweeted President Trump on March 9. Just the day before, Saudi Arabia launched an oil price war against Russia because President Vladimir Putin refused to cut back his country's production. By then rising global supplies had already pushed the price of benchmark WTI oil down from $63.05 per barrel at the end of 2019 to just over $40 at the beginning of March. Toward the end of the month, the price of WTI oil had dropped to $21.50 per barrel before bouncing back to just over $26 now.
Of course, driving is way down as a result of pandemic lockdowns. In fact, vehicle miles traveled were down in March about 70 percent in major U.S. cities.
The oil consultancy IHS Market projects that the economic retrenchment in response to the coronavirus pandemic lockdowns will reduce global oil demand in the second quarter of 2020 by 16.4 million barrels per day, and that the decline in April steepened to 20 million barrels per day. The world was recently producing 100 million barrels per day, so that much of a decrease in demand roughly means that there are 20 million barrels per day in excess capacity.
No longer touting lower gasoline prices, Trump has instead begged the Saudis and Russians to cut their oil production. On April 2, the president tweeted: "Just spoke to my friend MBS (Crown Prince) of Saudi Arabia, who spoke with President Putin of Russia, & I expect & hope that they will be cutting back approximately 10 Million Barrels, and maybe substantially more which, if it happens, will be GREAT for the oil & gas industry!" He further tweeted: "Could be as high as 15 Million Barrels. Good (GREAT) news for everyone!" Everyone except American drivers and anyone else who uses petroleum products.
The next day, the Russian government denied that Putin had actually spoken with Trump's murderous friend Mohammed bin Salman. At that point, the president shifted from begging to threatening tariffs.
"I am a big believer in our great energy business, and we're going to take care of our energy business," Trump said during a Saturday press briefing. "If I have to do tariffs on oil coming from outside, or if I have to do something to protect—or thousands and tens of thousands of energy workers, and our great companies that produce all these jobs—I'll do whatever I have to do," he added.
Trump has denied that OPEC and Russia are demanding comparable cuts in the U.S. oil production. With respect to cutting domestic production, the president, much to his credit, said, "I think the cuts are automatic if you are a believer in markets."
In other words, Trump proposed imposing a tax that will end up increasing the price of gasoline for American consumers. Why? Because of the bigger role that energy companies are playing in the economy as the U.S. last year became the world's largest oil producer at 12.8 million barrels per day. As oil prices fell, the domestic industry began to shrink while layoffs swelled.
Source : Various channels
The Organization of Petroleum Exporting Countries and its allies, meeting by video conference on Thursday (9.4.2020), now have the outline of a deal to cut production by 10 million barrels a day, delegates said. Importantly, Russia has agreed to make deep cuts, the delegates said.
Above to the reason oil recovered and ahead of expectations oil gains slowly to peak
Source : Various channels