Despite the global concerns over Coronavirus, may Allah protect us all, there is another looming threat in the oil market after oil prices crashed in Asia by more than 20%
According to what analysts expect, we are about to witness the start of a price war. between the major oil producers in Asian markets.
Saudi Arabia, the largest oil exporter, slashed prices after it failed to persuade Russia on Friday to support a significant cut in production. The Organization of Petroleum Exporting Countries (OPEC), and its ally Russia, have previously imposed production restrictions.
Brent oil futures fell to $31.02 a barrel in volatile energy markets.
Oil prices have now fallen by 30 percent since last Friday, when 14 countries in OPEC, led by Saudi Arabia, met with their allies Russia and other non-OPEC members.
The meeting was held to discuss how to respond to the decline in demand, which is caused by the increasing spread of the Coronavirus. But the two sides failed to agree on measures to reduce production, by about 1.5 million barrels per day.
Initially, Brent’s price fell below $ 50 a barrel last Friday, with the downtrend moving to Asia on Monday, which is home to some major importers, including China, Japan, South Korea, and India.
With the global production of oil now exceeding demand, oil analysts expect OPEC members to pump more oil to acquire market share. Given that OPEC countries now have very little incentive to curb production, oil markets appear to be overcrowded with excess supply,” Ratz said in a research note.
Overall, oil prices were at these levels in January 2016 and are close to their lowest level in 16 years.
On the other hand, the collapse in oil prices caused a painful blow to the Gulf economies that depend on crude as the main source of their revenues.