Oil tumbles 31%, most since Gulf War, after surprise Saudi cuts trigger global price war

Associated Press

• Oil prices slumped the most since 1991 after Saudi Arabia’s weekend price cuts sparked a race to the bottom between OPEC, Russia, and the US. 
• Brent crude futures sank as much as 31% to $31.02 per barrel Monday morning, while West Texas Intermediate contracts tumbled as much as 34% to $27.34 per barrel.
• The new volatility in oil markets “completely changes the outlook” and could see Brent crude sink as low as $20 per barrel in 2020, Goldman Sachs analysts wrote.
• Watch Brent crude trade live here.

Oil prices tanked the most since 1991 in early Monday trading after Saudi Arabia slashed prices and prompted retaliation from Russia.

Demand for the commodity has plummeted since the coronavirus began tearing into the global travel and tourism industries, leaving the Organization of Petroleum Exporting Countries racing to support the ailing sector. Russia refused OPEC’s plan to slash production and support the market, driving the price of Brent crude down nearly 10% on Friday to $45.27 per barrel.

Saudi Arabia fired back on Saturday, cutting its prices the most in 20 years and sparking a price war between OPEC, Russia, and the US. The fallout pushed Brent crude futures down as much as 31% to $31.02 per barrel on Monday morning, its second-biggest drop since the Gulf War in 1991.

West Texas Intermediate futures sank as much as 34% to $27.34 per barrel.

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Prices for both oil classes partially recovered through the morning. Brent traded down 22% to $35.30 per barrel as of 9:20 a.m. ET. WTI was down 22% to $32.12 per barrel.

“This completely changes the outlook for the oil and gas markets, in our view, and brings back the playbook of the New Oil Order, with low cost producers increasing supply from their spare capacity to force higher cost producers to reduce output,” Goldman Sachs analysts wrote Sunday.

The bank lowered its second- and third-quarter Brent forecasts to $30 per barrel, adding that potential price drops could even see the commodity sink to $20 per barrel.

The oil pricing chaos drove fresh volatility across other markets. Stock market futures tumbled before the open, and yields for all US Treasury bills dipped below 1% for the first time ever.

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