Yesterday, crude prices fell close to 25% on Saudi Arabia beginning a price war with Russia. Saudi Arabia escalated its oil price war with Russia on Tuesday, with its state-owned company pledging to supply a record 12.3 MMbpd next month, a massive production increase to flood the market. The output hike of more than 25% from last month puts Aramco supply above its maximum sustainable capacity, indicating that the kingdom is even tapping its strategic inventories to dump as much crude, as quickly as possible. In February, Saudi Arabia produced about 9.7 MMbpd.
Russian oil minister Alexander Novak said he did not rule out joint measures with OPEC to stabilize the market, adding that the next OPEC+ meeting was planned for May-June. Saudi Arabia’s energy minister stated overnight, however, that he does not see a need to hold an OPEC+ meeting in May-June if there was no agreement on what measures should be taken to deal with the impact of the coronavirus on oil demand and prices.
Yesterday also brought some equity market instability. Shortly after opening, stock prices fell 7%, triggering a 15-minute halt to trading. The halt allowed cooler heads to prevail, and the market stabilized after reopening. Yesterday marked the biggest loss since 2008, and one of the top 20 worst days in stock market history. This morning, stocks are joining the rally, with the Dow up by more than 500 points (+2.3%).
In early trading this morning, crude prices are rebounding from yesterday’s drop. Crude prices are up over 8% this morning after the biggest one-day loss in nearly 30 years. Crude is currently trading at $33.85, a gain of $2.72.
Fuel prices are also up. Diesel is trading at $1.2624, a gain of 10.0 cents. Gasoline is trading at $1.1852, a gain of 4.8 cents.