Oil prices, as well as, stocks listed on global stock-exchanges have undergone drastic crash in prices and value as a result of investor and countries’ panic over incidence of the novel viral pandemic, coronavirus.
The Organisation of Petroleum Exporting Countries (OPEC) had failed to reach consensus among its member countries on issues of a regulated price per barrel on crude oil, for which the body proposed production cuts to its members.
It would be recalled that Russia had rejected the petroleum export governing body’s proposal which had led to failed talks and end to effecting further discussions among other countries.
In its response, the world’s largest exporter of crude oil, Saudi Arabia, in a move which was totally against OPEC proposals, had on Monday slashed its official selling prices and made plans to ramp up crude output next month, resulting in steep decline on world oil prices.
According to a source close to the Arabian government, the country had plans to increase its crude output to over 10million barrels per day in April 2020 once present deal which stated production limits, expires at the end of March.
The source, who spoke on condition of anonymity, alleged that plans were currently been intensified by an Arab country to punish Russia for not supporting OPEC’s proposed production cuts.
Oil price has not been the only affected variable as stocks have also fallen to an all-time low due to disintegration of the grouping called OPEC+ which was made up of OPEC and other oil producers including Russia, and global panic regarding the deadly covid-19 viral pandemic.
Worldwide reports place number of people who have been infected with the deadly virus at more than 106,000 and that there has been over 3,600 coronavirus deaths, globally, with new cases of the novel infection still being reported in countries around the world.
Countries and global investors had, therefore, committed to focusing on preparedness against incidence of the deadly virus, and care, quarantine, and curbing of further spread among their populations, causing a sharp decline in global businesses that were exacerbated by fall in oil prices.
Monday global stockmarket reports showed that pan-European Stoxx 600 dropped 6.1 percent to enter bear market territory, with oil and gas stocks plunging 13.9 percent to lead losses as all sectors and major bourses fell sharply
As oil prices crashed to more than 30%, all stocks on Italy’s FTSE MIB except pharmaceutical group Recordati initially failed to open at start of the day’s trading activities, with Italian blue-chip index falling by over 10 percent in early deals.
Energy giant BP recorded an 18% drop and Royal Dutch Shell, 21% in early trade with Britain’s Tullow Oil falling by 37 percent and TGS-NOPEC shares falling by 24.8 percent.
Also, Aker BP and Wood Group stocks both dropped 23 percent, Brent LCOc1 crude futures were down $11.38, or 25 percent, to $33.89 per barrel by 0732 GMT, after earlier dropping to $31.02, their lowest since Feb. 12, 2016.
It was also recorded that U.S. West Texas Intermediate (WTI) crude CLc1 fell by $11.12, or 27 percent, to rest at $30.16 per barrel, after touching $27.34, also the lowest since Feb. 12, 2016.
According to the Senior Vice President on Strategic Analysis, ARM Energy, Keith Barnett, “The timing of this lower price environment should be limited to a few months unless this whole virus impact on global market and consumer confidence trigger the next recession”.
Leading global investment banking, securities, and investment management firm, Goldman Sachs, also stated that “The prognosis for the oil market is even direr than in November 2014, when such a price war last started, as it comes to a head with the signiﬁcant collapse in oil demand due to the coronavirus”.