Oil prices crashed over the weekend and into Monday’s Asian trading session after OPEC failed to make a deal with its allies to cut production across the board. The downward spiral started when long-standing OPEC ally Russia rejected the notion of additional production cuts that OPEC leaders had suggested could prop up prices during the recent time of low demand.
In response to Russia’s decision, Saudi Arabia announced that it would slash prices for April and that it would be willing to increase its production above the 10 million barrel per day mark, Reuters reported. The country’s current production level is set to 9.7 million barrels per day, but its capacity is as much as 12.5 million barrels per day. Saudi Arabia’s price cuts over the weekend were the steepest cuts implemented by the country in over 20 years.
Following the announcement, Goldman Sachs analysts forecast that Brent prices could dip into the $20s per barrel. The company cut its second and third quarter prices forecasts for Brent to $30 per barrel. Exxon executives made similar doomsday forecasts, though optimists have posited that the decline in the oil markets would prompt OPEC and Russia to come to an agreement sooner rather than later.
As of 2:18 p.m. HK/SIN, U.S. WTI futures has lost 27.93 percent to trade at $29.75 per barrel. Brent Crude futures eased 25.91 percent to trade at $33.54 per barrel.
Gold prices spiked briefly to $1,702.56 on Monday, their highest levels since December 2012 as traders shed their stock holdings and searched for safe-haven assets on the slew of devastating news over the weekend, including the turbulence in the oil markets. Also prompting traders to seek safe havens was the announcement over the weekend that the Italian government has quarantined a quarter of the country’s population in an effort to control the spread of the coronavirus in the country.
A Reuters poll over the weekend indicated that the virus likely halved China’s economic growth in Q1, and that further interest rate cuts are looming in the United States and possibly in other countries as central banks rush to control the economic damage caused by the virus.
Traders should prepare for a week of high volatility and wild swings in all markets and should remain focused not only on the technicals, but on the way news can cause sudden swings in the markets, as evidenced by the dramatic swings in the oil markets that stemmed from Russia’s announcement.