Entering text into the input field will update the search result below

Oil Prices Plunge In Response To The Collapse Of The OPEC+ Alliance

Mar. 10, 2020 5:02 PM ET2 Comments
S&P Dow Jones Indices profile picture
S&P Dow Jones Indices


  • Oil prices lost as much as a third of their value on Monday, March 9, 2020, the largest daily rout since the 1991 Gulf War.
  • It is also worth highlighting that the collapse of the OPEC+ agreement, and the anticipated increase in supply that it will bring, has been made against the backdrop of stymied global oil demand.
  • Unless Saudi Arabia's shock and awe tactics bring OPEC+ members, namely Russia, back to the negotiating table, the fight for oil market share has well and truly commenced.

By Fiona Boal

The S&P GSCI Brent Crude Oil has fallen by more than 30% over the first six trading days of March. On Friday, March 6, 2020, Russia opted out of a Saudi-led proposal to extend and deepen crude production cuts that had been central to a nearly three-year OPEC+ agreement to manage global oil supplies. With coronavirus cramping global oil demand, OPEC, led by Saudi Arabia, had wanted to further restrict supply to hold up oil prices.

Oil prices lost as much as a third of their value on Monday, March 9, 2020, the largest daily rout since the 1991 Gulf War. The S&P GSCI Brent Crude Oil ended the day down 23.5%. Exhibit 1 offers a visual representation of this one-day price fall in the Brent crude oil prices.

The disintegration of the OPEC+ agreement almost immediately creates a new operating environment for the world's three largest oil producers.

  1. Over the weekend, Saudi Arabia slashed the price of its crude oil by USD 6-USD 8 per barrel for all oil grades to all destinations, the largest single price cut in 30 years. It also signaled its intention to raise its oil production next month. While Saudi Arabia has the lowest cost of production, the largest amount of excess oil capacity, and can weather lower oil prices better than others, its economy and its social cohesion are highly dependent on strong oil prices.
  2. It would appear that Russia could no longer stomach that the OPEC+ production cuts were unintentionally favoring U.S. shale producers and likely limiting domestic energy investments. The Russian economy is more diversified than that of Saudi Arabia, and it is possible that Russia could also weather lower oil prices for some time.
  3. U.S. shale producers are the clear losers if this new low-price environment becomes the

This article was written by

S&P Dow Jones Indices profile picture
At S&P Dow Jones Indices, our role can be described in one word: essential. We’re the largest global resource for index-based concepts, data and research, and home to iconic financial market indicators, such as the S&P 500® and the Dow Jones Industrial Average®. More assets are invested in products based upon our indices than any other index provider in the world; with over 1,000,000 indices, S&P Dow Jones Indices defines the way people measure and trade the markets. We provide essential intelligence that helps investors identify and capitalize on global opportunities. S&P Dow Jones Indices is a division of S&P Global, which provides essential intelligence for individuals, companies and governments to make decisions with confidence. For more information, visit www.spdji.com.Copyright © 2016 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. This material is reproduced with the prior written consent of S&P DJI. For more information on S&P DJI please visitwww.spdji.com. For full terms of use and disclosures please visit www.spdji.com/terms-of-use.

Recommended For You

Comments (2)

@author this is a good summary, thanks, and this may be the most important comment
" Falling demand has the potential to both deepen and lengthen the energy price rout."

this rout is worth observing in detail, global demand slowdown combined with oil price war, wow, how far down will oil/oil companies/service/ng go?
Ben Gee profile picture
Low oil price will make the recovery a little easier.
I do not feel bad for oil producers.
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.