Oil prices crashed as much as 30 per cent within seconds of the market opening on Sunday evening after Saudi Arabia launched an aggressive price war over the weekend, driving crude to its lowest level in four years.
The sell-off followed the collapse of Saudi Arabia’s oil-cutting alliance on Friday, with Russia refusing to make deeper cuts to output despite the sharp hit to demand from the coronavirus outbreak. Saudi Arabia’s response — to raise output and offer its crude at unprecedented price discounts — came despite a weakening economy and the threat of coronavirus becoming a global pandemic sapping demand for transport and fuel.
“It is very rare for a demand collapse to coincide with a supply surge,” said Bob McNally at the Rapidan energy Group. “It is the most crude price-bearish combination since the early 1930s. The price collapse has just begun.”