Saudi-Russia Rift Amid Pandemic Drive Crude Oil To 17-Year Low

Oil prices fell dramatically on Monday, reaching their lowest levels since November 2002 as Saudi-Russia fail to agree on the scale of production and the coronavirus pandemic strangles demand.

What Happened

Brent crude prices fell as low as $23.03 on Monday morning, a level not seen since November 2002. 

Commenting on the drop in oil prices, Satoru Yoshida, a commodity analyst at Rakuten Securities, told Reuters, “Until we see signs of the pandemic ending, oil prices will stay under pressure and could dive below $20 a barrel.” According to Yoshida, the next support level for WTI crude would near $17, the price level last recorded in 2001.

Why It Matters

A price war between Russia and Saudi Arabia has exacerbated the decline in oil prices. Talks between the Organization of the Petroleum Exporting Countries (OPEC), of which Saudi Arabia is a member, and a non-OPEC group led by Russia,  collapsed earlier in March.

A Saudi Energy ministry official said on Friday that the country was not in talks with Russia to balance the oil markets even though there is increasing pressure from the United States, reported Reuters.

The COVID-19 pandemic has led to a worldwide grounding of aviation, and with 3 billion people under lockdown orders, the result has been a decline of 60% in oil prices this year.

According to the World Health Organization, the coronavirus pandemic has killed 29,957 people globally, with 634,835 officially registered infected cases.

Price Action

On Monday, the price of a barrel of Brent crude oil fell 6.90% to $23.21 at press time. WTI futures were trading at 5.95% lower at $20.23 at press time.