Saudis slash oil export prices by 10%, Middle Eastern stocks plummet


  • Oil price wars set to play havoc on financial markets with Saudi Arabia planning to increase oil output.
  • WTI tipped for an opening plunge in the Asia open, Saudi Aramco, plummeted by more than 9% on Sunday.

The Asian open will have two major weekend developments in play, the spread of the coronavirus and bearish oil. Following the largest one-day decline for oil since 2014 that pushed 13 stocks in the S&P 500 energy sector down by double digits, risk-off markets will likely accelerate on Monday after receiving the news that Saudi Arabia has slashed its export oil prices in what is likely to be the start of a price war aimed at Russia. 

Due to the failure by OPEC and Russia to come to an agreement on oil-production cuts in the wake of greatly reduced global demand as the coronavirus continued to spread, on Friday, West Texas Intermediate crude oil for April delivery plunged 10.2% to settle at $41.28 a barrel in the largest one-day decline for the most-active contract since Nov. 28, 2014. WTI fell to a low of $41.09 from the $46 handle. However, this latest news has the potential to take prices below the weekly support into 2015-2016 price ranges.

With Saudi Arabia planning to increase oil output next month, well above 10m barrels a day, reported by Bloomberg citing "people familiar with the conversations, who asked not to be named to protect commercial relations", and privately telling some market participants it could raise production much higher if needed, even going to a record of 12 million barrels a day (above the current 9.7 millions a day), the geopolitical risks alone will make for a widespread market drama.  The ramifications of such an act will put the Middle East firmly back on the map when considering how Saudi Arabia’s enemy Iran will likely respond. 

The move is seen as an act of retaliation for Russia’s refusal on Friday to join the Organization of the Petroleum Exporting Countries in a large production cut as the coronavirus continues to slow the global economy and, with it, demand for oil. However, on the other hand, it could play out as a means to encourage Russia back to the OPEC+ negotiating table and open a path to finally agree on a compromise – for one, Russia will likely wish to protect Venezuela's interests which will otherwise be highly impacted by the drop in oil prices, not to mention how its oil-based economy is already under pressure from American sanctions.

Market impacts

  • The price of oil (testing weekly support).
  • Developing nations that depend on oil prices such as Brazil, Venezuela, Nigeria, Angola.
  • Middle Esterna shares, (shares of Saudi Aramco, the Saudi national oil company, plummeted by more than 9% on Sunday, falling below its December initial public offering price of 32 riyals for the first time).
  • Highly indebted American oil companies. 
  • American oil production and oil-producing states.

 

 

 

 


 

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content


Recommended content

Editors’ Picks

AUD/USD continues to face pressure near 0.6300, US NFP in focus

AUD/USD continues to face pressure near 0.6300, US NFP in focus

AUD/USD edges higher but remains below 0.6300 ahead of the US NFP data for January. The US NFP data would drive market expectations for the Fed’s interest rate outlook. Investors await the Trump-Jinping meeting to get more developments on the trade relations between China.

AUD/USD News
EUR/USD: US trade war and Powell’s testimony in the eye of the storm

EUR/USD: US trade war and Powell’s testimony in the eye of the storm

The EUR/USD pair ends the week trading at around 1.0370, little changed from its previous weekly close of 1.0361. Tensions related to the United States trade war with its major counterparts dominated financial boards in the last few days and will likely remain as the main market mover.

EUR/USD News
Gold sets new record-high as US yields push lower

Gold sets new record-high as US yields push lower

Gold touches yet another all-time high, boosted by falling US T-bond yields. Fed Chair Jerome Powell’s testimony, January US inflation data, and political headlines could drive Gold’s action next week. The near-term technical outlook points to overbought conditions for XAU/USD.

Gold News
Week ahead: Will US CPI be a positive distraction amid Trump’s dramas?

Week ahead: Will US CPI be a positive distraction amid Trump’s dramas?

US consumer and producer prices to be main focal point. UK economic output data to be watched too. But Trump and tariff headlines might be a bigger market driver.

Read more
Top Trumps: The global economy’s House of Cards

Top Trumps: The global economy’s House of Cards

The year has barely started and we are learning the hard way what Donald Trump’s second term in office means for markets, analysts and global policymakers. It's like living through an episode of the political thriller, House of Cards.

Read more
The Best Brokers of the Year

The Best Brokers of the Year

SPONSORED Explore top-quality choices worldwide and locally. Compare key features like spreads, leverage, and platforms. Find the right broker for your needs, whether trading CFDs, Forex pairs like EUR/USD, or commodities like Gold.

Read More

Forex MAJORS

Cryptocurrencies

Signatures

Best Brokers of 2025