By Adedapo Adesanya
Oil prices have crashed by over 25 percent, sending the global market into turmoil after Saudi Arabia slashed prices of its crude grades and created an oil price war. This is being regarded as the highest loss for oil since January 1991 at the beginning of the Gulf War.
The recent development comes after the collapse of discussions among members of the Organisation of the Petroleum Exporting Countries (OPEC) and its allies led by Russia, which refused to agree to extend production cuts.
With the market not getting any help from the cartel, it fell as much as 10 percent last week Friday and over the weekend, Saudi Arabia decided to reduce the prices of its official selling prices (OSP) for the month of April.
The Kingdom shelved most of its crude between $6 and $8, and this has sent a message to its former allies, and with the alliance falling down. This means all other countries can produce as much as they can.
With the coronavirus taking on the market head on and affecting demand due to restrictions on travel, market will be flooded and most producers may have to follow, crashing prices.
On the part of Russia, it had announced after the OPEC meeting that the present price of the commodity, which was around the $40 mark, was sustainable to its economy but with the present reality, there may be a retaliation of slash in prices.
It is also believed that this can bring together the alliance as the impending effect that this will have on countries, especially oil economies like Nigeria will be too much to bear as most have resulted to borrowing.
However, if this does not see the light of day, there are projections that oil prices can fall to as much as $20 per barrel this week.
The Brent crude, as at the time of filing this report, was down by over 24 percent equivalent to $10.83 to sell at $34.44 per barrel, while the United States West Texas Intermediate (WTI) has plummeted by 26 percent or $11 to $30.59.
Modupe Gbadeyanka