Oil Price Crashes Due to the Coronavirus Outbreak

Oil prices collapsed by as much as 30% after Saudi Arabia fired the ‘first shots’ in the latest scrambling price war, which comes amidst the Coronavirus outbreak. This plunge in oil price is the crude oil’s biggest one-day fall since the instigation of the 1990's Gulf War.

Riyadh’s realistic threats to cut its crude price and raise production pressured the global price of Brent crude to plummet to as low as $31.02 per barrel. West Texas Intermediate which sets the US benchmark, fell to $27.71 per barrel.

"It shows a level of nervousness in the market which I haven't seen in a long time," says Justin Urquhart-Stewart, founder of an Investment firm.

Stockholders are selling shares at an alarming rate since they cannot calculate or predict what OPEC country Saudi Arabia or Russia might do.

The oil-exporting intergovernmental organization OPEC last week arranged to cut production in order to support prices. The organization also demanded non-OPEC oil manufacturers, such as Russia, to agree to the prearranged production cuts. Predictably, Russia rejected the plans on Friday.

As a reaction, Saudi Arabia cut its legitimate selling prices for oil and plans to upsurge production. The move is seen by analysts as Saudi Arabia ‘flexing its muscles’ in the oil industry to make Russia fall into line.

“[The market] has gone from an issue over economic demand into more of a political game of poker," Mr. Urquhart-Stewart, a British Investor analyst, said. "It's already a very volatile situation".

By Beka Alexishvili