Oil prices collapse with biggest drop since 1991 Gulf War

Oil prices collapse with biggest drop since 1991 Gulf War

Saudi Arabia ignited a price war overnoght by slashing its official selling prices and making plans to ramp up crude output next month after Russian Federation rejected production cuts proposed by the Organisation of Petroleum Exporting Countries (OPEC) to stabilise the markets in the face of the global health crisis.

Australia-listed Oil Search's share price dropped by 31% while energy firm Santos saw its shares drop more than a quarter in value (27%).

Should these losses hold, it would be the biggest one-day percentage decline for both benchmarks since January 17, 1991, the outset of the U.S. Gulf War, when it fell by a third. The S&P 500 lost 5.8 percent and the Nasdaq gave up 5.5 percent.

This most recent plummet for oil adds another punch to what's already been a brutal and dizzying couple weeks for financial markets worldwide.

"That roughly $20 difference between what the budget plans for and where markets now are - that's about a $7-billion hit to government revenue".

Stephen Innes, chief market strategist at financial services firm AxiCorp., says Russian President Vladimir Putin may also have made a decision to hit back at the US industry after Washington placed sanctions on Russian state oil company Rosneft for marketing Venezuela's oil. "We're not that far from entering into bear market territory another sign of economic decay".

West Canadian Select crude, the chief grade produced in Canada's energy patch, dropped to US$22.05 per barrel as prices for the North American and global benchmarks tumbled.

In another tweet he said: "Good for the consumer, gasoline prices coming down!"

Treasury yields have plummeted to record lows as investors pile into anything that looks safe, nearly regardless of how little it pays.

The 10-year U.S. Treasury note hit a new intraday low on March 9, 2020.

Oil prices dropped 30 percent going into Monday, and the wider markets are reeling from the shock.

The Wall Street "fear gauge", or the VIX volatility index, which is a measure of implied market swings, shot up to almost 60, a level not seen since the 2008 financial crisis.

A reading above 31 is considered to be reflective of extreme levels of investor fear and uncertainty.

Global oil prices crashed by a third after Riyadh discounted its crude and signalled it would raise output.

The global oil price war may take a heavy toll on the Canadian energy industry, which still hasn't fully recovered from the last crash that started in 2014.

On Sunday, Saudi slashed its export prices and pledged to unleash its pent-up supply of oil onto the financial markets.

"Look, you've got one of the most powerful commodities in the hands of two of the largest superpowers in the world, and they are not agreeing on it", said Peter Tuchman, NYSE trader, in comments to Reuters.

Last week the Organization for Economic Cooperation and Development (OECD) said a severe outbreak of the coronavirus could see global growth down by 0.5 to 1.5 per cent. "That's what we have in there today". Saudi Arabia, whose economy is less diverse, needs more than $80 per barrel, according to the International Monetary Fund, even though its costs are much lower than Russia's.

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