Oil prices decreased as Saudi Arabia declares price war after coronavirus outbreak

Oil prices decreased 20 percent on Monday after Saudi Arabia decreased oil prices and decided to increase crude production, leading to a big loss for the US.

According to an international news agency, Saudi Arabia decreased prices and decided to increase crude production in April.

Prices decreased by as much as a third after which Saudi Arabia plans for price war balked at cutting the prices proposed by OPEC to stabilize oil markets after coronavirus outbreak.

According to the international news agency, Brent crude futures were down US$13.29, or 29per cent, at US$31.98 a barrel by 0433 GMT, after earlier dropping to US$31.02, their lowest since Feb. 12, 2016. Brent futures are on track for their biggest daily decline since Jan. 17, 1991, at the start of the first Gulf War.

U.S. West Texas Intermediate (WTI) crude decreased by US$13.29, or 32per cent, to US$27.99 a barrel, after touching US$27.34, its lowest since Feb. 22, 2016. The U.S. benchmark is potentially heading for its biggest decline on record, surpassing a 33per cent fall in January 1991.

Chief investment officer at Probis Securities in Sydney Jonathan Barratt said, “I think all forecasts are out the window,” “It seems like a race to the bottom to secure order(s).”

ING Economics said in a note, “This clearly is the start of a price war, and the Saudis were quick to react over the weekend, reducing their April official selling price for crude oil significantly,”

Saudi Arabia has decided to increase its crude output more than 10 million barrels per day in April amid the current deal to limit production expires at the end of this month (March).

Note that Russia is the second-largest producer of oil and it may be punished by Saudi Arabia for not supporting production cuts. Organization of the Petroleum Exporting Countries (OPEC).

According to international news agency Reuters, Saudi Arabia, Russia and other major producers last battled for market share like this between 2014 and 2016 to try to squeeze out production from the United States, which has grown to become the world’s biggest oil producer as flows from shale oil fields doubled its output over the last decade.