Oil Plummets as Saudi Arabia Prepares to Cut Prices
According to reports, Saudi Arabia is prepared to drastically lower oil prices, despite fears of upending the market, in an effort to “punish” Russia for walking out of last week’s OPEC+ meeting; a long-standing relationship between the world’s largest oil producers including Saudi Arabia and Russia was fractured as players failed to reach an agreement on production cuts to stabilize prices in the wake of the coronavirus-related economic slowdown. Longer-term, Saudi Arabia also hopes to capture some of Moscow’s global market share.
With energy-markets already well supplied, coupled with dwindling global demand, some analysts suspect unleashing a “torrent” of crude could undermine prices by 25% or more. Oil fell sharply to fresh multi-year lows when futures trading opened earlier this evening.
Brent is down 20.7%, currently trading at $35.98 a barrel as of 8:54pm ET.
Equities are pointing to another down day, with futures down 4.0% as of 8:57pm ET.
Additionally the 10-year dropped 22bps, currently trading below 0.60%.
With the Fed meeting just 10 days away, officials have gone into a blackout period ahead of the next policy announcement. With the market bracing for another hit – including banks and high yield – many are already calling for Fed officials to break the blackout to offer a calming reminder of readiness – if not additional emergency – policy support.
-Lindsey Piegza, Ph.D., Chief Economist