Oil plummeted to multi-year lows on Monday, seeing its worst day since 1991.
Oil prices dropped 24% as Wall Street digested OPEC failing to strike a deal last week with its allies, led by Russia, over production costs.
After the failed deal, Saudi Arabia cut its oil prices as it reportedly is looking to ramp up production to above the 10 million barrel per day mark, according to a Reuters report.
Both the U.S. West Texas Intermediate crude and international benchmark Brent crude posted their worst day since 1991 on Monday. The WTI dropped 24.59% while the International benchmark Brent crude fell 24.1%. Earlier in the session each contract fell over 30%.
“This has turned into a scorched Earth approach by Saudi Arabia, in particular, to deal with the problem of chronic overproduction,” Again Capital’s John Kilduff remarked. “The Saudis are the lowest cost producer by far. There is a reckoning ahead for all other producers, especially those companies operating in the U.S shale patch.”
“We believe the OPEC and Russia oil price war unequivocally started this weekend when Saudi Arabia aggressively cut the relative price at which it sells its crude by the most in at least 20 years,” Goldman Sachs analyst Damien Courvalin wrote over the weekend in a note to clients. “The prognosis for the oil market is even more dire than in November 2014, when such a price war last started, as it comes to a head with the significant collapse in oil demand due to the coronavirus,” the firm added.
Goldman has slashed its second and third quarter Brent forecast to $30 per barrel, and said that prices could dip into the $20s.