Crude Oil Drops Below $30 As Market Opens

Crude Oil Drops Below $30 As Market Opens

WTI Crude Oil has experienced an unprecedented sell-off, plunging 30% and falling below $30 a barrel. This marks the first time oil prices have dropped to such low levels since 1991 during the Gulf War. The dramatic drop follows the collapse of the OPEC+ alliance between Saudi Arabia and Russia, with Saudi Arabia opting to slash oil prices.

OPEC (Organisation of the Petroleum Exporting Countries) is a coalition of oil-producing countries, with Saudi Arabia as the de facto leader, holding 18% of the world’s oil reserves. The alliance had previously reached an agreement with Russia to limit oil production, but talks in Vienna fell apart when Russia refused to agree to the terms. As a result, Saudi Arabia decided to engage in a price war, simultaneously increasing oil production to 10 million barrels per day to capture more market share.

The market reacted immediately, with oil prices plummeting from $45 per barrel at the close of trading to $31 at the open, marking one of the biggest single-day drops in oil history.

As the world’s largest oil producer, Saudi Arabia is pushing for a competitive advantage by significantly lowering oil prices, with no clear floor for prices. According to Goldman Sachs, the price of oil could fall as low as $20 a barrel before Saudi Arabia halts production increases. This aggressive strategy may also be aimed at pressuring Russia to return to the negotiating table.

This new development adds further chaos to an already volatile market, coming just after signs of a market recovery, especially in US stocks, which had begun to rebound following the previous month’s crash. The long-term impact of this price drop will depend on how long Saudi Arabia is willing to sustain these aggressive price cuts.