Nearly 30 percent oil futures dropped after the weekend due to the breaking of the agreement between OPEC and Russia. Saudi Arabia, the largest oil exporter in the world, did not agree on increasing production cut limits and announced a price war, the effects of which are being seen today in the morning.
On 5-6 March, OPEC and Russia were to come to an agreement on cutting production to stop oil price falls. The falls, in turn, seemed to be a consequence of the coronavirus epidemic - its possible impact on the economy and reduction of oil demand. However, Russia did not agree to deepen the cut, as this could contribute to increasing the dominance of the United States on the market. Domination appeared along with OPEC + activities. Russia apparently does not accept such a policy, which led to the breaking of the alliance with OPEC. As a consequence, the Sauds reduced their oil prices to contractors, going to a full-blown price war with Russia. Saudi Arabia also announced unscrewing the tap with oil and pumping it full to the global market. Thus, production is to increase up to 12 million barrels per day. This is more or less the maximum production capacity of this country.
Increasing oil supply, cutting prices, breaking the alliance, the progressive epidemic of COVID-19, all in one weekend. The price of WTI oil in the morning stabilizes around USD 30 per barrel, while at the beginning of this year the price of a barrel was USD 65. To realize how cheap oil is today, some are bitterly comparing the price of a barrel to a bucket of chicken from one of the popular fast-food chains. Oil is cheaper in this ranking ...
Investors are waiting for Russia's response, and in the background, there may be growing concerns about an escalation of the conflict. It could even lead to increased military operations. As if the markets were not too much trouble, now another risk factor has emerged that could destabilize the political situation in the Persian Gulf region.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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