By Adedapo Adesanya
Oil prices traded down more than 24 percent on Monday night with Brent crude trading around $34 per barrel after prices crashed as a result of a price war caused by a feud between Russia and Saudi Arabia.
The market fell to the lowest since 1991, adding pressure to economies already weakened by the coronavirus, which has killed 3,800 people and infected over 110,000.
The International benchmark, Brent crude, against which most countries set their benchmark, on Monday night was trading down by 24.34 percent or $11.02 while the US West Texas Intermediate (WTI) crude futures was down by 25.3 percent or $10.44 barrel at $30.84 per barrel.
Last week, the Organisation of the Petroleum Exporting Countries (OPEC) led by its chair country, Saudi Arabia, agreed to cut production by a larger than expected 1.5 million barrels per day in order to support prices.
It also wanted non-OPEC oil producers, majorly Russia, to agree to cuts, but on Friday at a meeting, the Eastern European country rejected the proposal, causing the meeting to end in deadlock.
In response, Saudi Arabia cut its official selling prices for oil and plans to increase production. The move is believed to be Saudi Arabia’s way of controlling the oil market to make Russia fall into line and come back to the table.
However, the former ally to the producers on Monday said it can withstand as low as $25 per barrel price and added that it will also step up production in April, once the existing OPEC+ deal expires at the end of the month.
Russia’s Finance Minister, Mr Anton Siluanov said that it would draw from its $150 billion national wealth fund from its oil and gas surplus since 2017 in order to boost budget and spending, while oil prices remained at between $25 and $30 per barrel.
It also said it could maintain that level of budget support and cover the lost revenue for the next six to 10 years.
The new development is coming on the heels of weeks of poor performance for the market that occurs as a result of the spread of coronavirus drove renewed fears of a growth slowdown and eventual recession.
With these now, other OPEC members, including Nigeria are expected to pump more oil to capture their own market share, meaning prices could further fall if members don’t come back to the discussion table.
