2020 Russia–Saudi Arabia oil price war
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Comment: Wikipedia is WP:NOTNEWS Sulfurboy (talk) 05:03, 11 March 2020 (UTC)
On 8 March 2020, Saudi Arabia initiated a price war with Russia, triggering a major fall in the price of oil, with US oil prices crashing 34%, crude oil crashing 26%, and brent oil falling by 24%.[1] The price war was triggered by a breakup in dialogue between the Organization of the Petroleum Exporting Countries and Russia over proposed oil production cuts in the midst of the 2019-20 coronavirus outbreak. Oil prices had already fallen 30% since the start of the year due to a drop in demand.[2] The fall in prices was one of the causes of the global stock market crash on 9 March 2020, colloquially known as Black Monday.
Background
As a result of the 2019-20 coronavirus outbreak, factory output and transportation demand fell, bringing overall demand for oil down as well, and causing oil prices to fall. On 15 February 2020, the International Energy Agency announced that demand growth would fall to the lowest rate since 2011, with growth falling by 325,000 barrels per day to 825,000 barrels per day, and a contraction in consumption by 435,000 barrels per day.[3] Although demand for oil was falling globally, a drop in demand in China's markets, the largest since 2008, triggered an OPEC summit in Vienna on 5 March 2020. At the summit, it was agreed to cut oil production by 1.5 million barrels per day through the second quarter of the year, with the group expected to review the policy on 9 June during their next meeting.[4] On Friday 6 March 2020, Russia rejected the proposal, with oil prices falling 10% after the announcement.[5]
On 8 March 2020, Saudi Arabia announced unexpected price discounts of $6 to $8 per barrel to customers in Europe, Asia, and the United States. The announcement triggered a free fall in oil prices that day, with brent crude falling by 30%, the largest drop since the Gulf War.[6] The announcement had far-reaching consequences. The West Texas Intermediate, a grade of crude oil used as a benchmark in oil pricing fell 20%. On 9 March 2020, stock markets worldwide reported major losses thanks in part to a combination of price war and fears over the coronavirus outbreak. In the days after the announcement, oil prices and markets recovered somewhat, with oil prices increasing by 10%, and most stock markets recovering the day after Black Monday.[7][8]
Effect on stock markets
On Monday, 9 March 2020, stock markets globally experienced major point drops due to a combination of panic over the 2019-20 coroanvirus outbreak and the price war between Saudi Arabia and Russia. The Dow Jones fell over 7%, or 2,000 points, the largest point drop in its history.[9] Other stock markets were similarly affected, with the S&P 500 contracting by 7.6% and the NASDAQ Composite contracting by 7.2%. Italy's FTSE MIB suffered the largest drop in percentage, with the index falling 11%. In the United States, the drops triggered circuit breakers designed to prevent stock market crashes, leading to 15-minute pauses in trading.[10]
See also
References
- ^ Business, Matt Egan, CNN. "Oil crashes by most since 1991 as Saudi Arabia launches price war". CNN. Retrieved 2020-03-10.
{{cite web}}:|last=has generic name (help)CS1 maint: multiple names: authors list (link) - ^ "Oil Prices, Stocks Plunge After Saudi Arabia Stuns World With Massive Discounts". NPR.org. Retrieved 2020-03-10.
- ^ "IEA: Oil Demand To Fall For First Time In A Decade". OilPrice.com. Retrieved 2020-03-10.
- ^ Ellyatt, Sam Meredith,Holly (2020-03-05). "Oil drops as OPEC agrees on massive oil supply cut to offset virus impact; awaits Russia's approval". CNBC. Retrieved 2020-03-10.
{{cite web}}: CS1 maint: multiple names: authors list (link) - ^ "Oil plunges 10% after Opec deal collapses". BBC News. 2020-03-06. Retrieved 2020-03-10.
- ^ Bostock, Rosie Perper, Bill. "Oil is down 21% after its biggest drop in decades following Saudi price cuts that sparked a race to the bottom with Russia". Business Insider. Retrieved 2020-03-10.
{{cite web}}: CS1 maint: multiple names: authors list (link) - ^ "Markets start to bounce back after steep losses". BBC News. 2020-03-10. Retrieved 2020-03-10.
- ^ Stevens, Pippa (2020-03-09). "Oil jumps more than 10% one day after sharpest decline since 1991, amid hopes for continued OPEC talks". CNBC. Retrieved 2020-03-10.
- ^ "Dow closes with decline of 2,000 points, almost ending 11-year bull market". NBC News. Retrieved 2020-03-10.
- ^ Bloom, Jeff Cox,Michael (2020-03-09). "The market triggered a 'circuit breaker' that kept stocks from falling through the floor. Here's what you need to know". CNBC. Retrieved 2020-03-10.
{{cite web}}: CS1 maint: multiple names: authors list (link)