A price war between oil superpowers Russia and Saudi Arabia has set oil prices free-falling since Sunday morning without immediate signs of hitting any floor.
Brent Crude, the international benchmark for oil prices was $35.24 per barrel at 11:21 GMT, having lost $10.03, and fallen by over 22.16 percent, live updates from oilprice.com show.
A similar scenario played out in 2008 or 2014. The OPEC+ meeting broke last Friday without a deal. This sent oil prices into a freefall. During the mid-day trading on Friday, Brent was down about 9 percent and rapidly headed to the low of $40s.
Oil prices may be headed towards the 2016 lows, which ushered Nigeria into its first recession in 25 years.
The faceoff between Russia and Saudi Arabia will adversely impact oil producers such as Nigeria and US shale companies. In other words, global oil prices have crashed due to oversupply and weak demand. The US has hit a supply peak of 13 million barrels per day. And Saudi Arabia is at 12 million barrels per day.
Unlike the 2016 lows, which were largely driven by oversupply, the current oil price freefall is a demand-led crisis. The global economy is facing real questions about a recession, and the coronavirus continues to spread. The airline industry could lose more than $100 billion. The rough patch ahead could be worse than 2008 and 2016 lows.
“It is the most severe decline since Q4 2008, the height of the 2008-2009 global economic crisis, which saw demand tumble by 2.8 million barrel per day,” Ann-Louise Hittle, vice president, Macro Oils, at Mackenzie, said in a statement.
The consultancy sees demand contracting by over 2.7 million barrels per day. If the impact of coronavirus has had on global oil demand is sustained.
