Crude oil prices dived to their lowest level in four years during early trading on Monday as the Organization of Petroleum Exporting Countries (OPEC) and its allies failed to make a deal over production cuts on Friday.
The international benchmark, Brent, plummeted to as low as $31.27 per barrel in early trading on Monday marking a 30.9% loss after it closed Friday at $45.27 a barrel. American benchmark West Texas Intermediate (WTI) fell to as much as $27.34 a barrel for a 33.7% decline after it ended Friday at $41.28 per barrel.
While both benchmarks hit their lowest levels since Feb. 12, 2016, they also posted their largest daily percentage loss since January 1991 during the Gulf War, according to official data.
Saudi Arabia-led OPEC and Russia-spearheaded non-OPEC oil producing countries met Friday in Vienna, Austria to discuss making additional cuts in their oil production, but they failed to reach an agreement.
The novel coronavirus (Covid-19) that emerged in China and quickly spread throughout the world has caused weak global economic outlook and low oil demand.
The global supply glut is set to further rise as the group, dubbed as OPEC+, failed to make deeper production cuts amid weak oil consumption worldwide.
In addition to the failure in agreeing more output cuts, it is still unknown whether OPEC+ will extend its existing production cut of 1.7 million barrels per day (bpd) when its expires at the end of March 2020, and whether Saudi Arabia will continue its voluntary cut of 400,000 bpd beyond this.
If both cuts are not rolled over, additional oil supply of 2.1 million bpd from the second quarter of 2020 onwards could emerge to continue keeping a downward pressure on prices.
By Ovunc Kutlu