Oil crashed the most in 29 years as Saudi Arabia and Russia vowed to pump more in a battle for market share just as the coronavirus spurs the first decline in demand since 2009.
Futures slumped by about 25% in New York and London Monday as Moscow and Riyadh began an all-out price war after the collapse of talks between members of the OPEC+ alliance last week.
Saudi Arabia slashed its official crude pricing and is threatening record output. Russia’s largest producer, meanwhile, said it will ramp up production next month. What’s more, all of the annual growth the International Energy Agency had anticipated last month has been erased, and oil demand is now expected to contract by 90,000 barrels a day this year.
The oil crash sent shock-waves across markets, with U.S. stocks going through one of the biggest sell-offs since the financial crisis, Treasury yields plummeting, and credit markets buckling. Stocks of energy producers were dragged down, and explorers including Occidental Petroleum Corp. and Parsley Energy Inc. planning drilling cuts.
“We’ve never experienced anything like this before,” says David Tawil, president of Maglan Capital in New York. “There was demand weakness before and this clash of the titans between Russia and Saudi is the ultimate shock. In the near term, markets are going to be absolutely chaotic and it’s going to be an overwhelming time for the entire industry.”
