The situation on the oil market has shifted completely since last week. Recall that OPEC member states had their regular policy meeting last week, where they agreed on a further production cut of 1.5 million barrels per day in order to stabilize oil prices. The extra cut was necessary because the coronavirus outbreak has caused a dramatic decrease in demand globally.
However, Russia, which is not an OPEC member, disagreed. This then led to dissent within OPEC and a complete abandonment of their previous agreement. So, instead of keeping production volumes low, Saudi Arabia started pumping extra oil. The reported increase is 10 million barrels per day.
Increasing oil production so suddenly, after almost four years of production cuts, especially in the current low-demand situation, caused oil prices to crash. Today Brent crude is trading around $35.91, while the WTI brand is near $32.26, after having dropped below $30 per barrel previously. The prices could go further down if the market is oversupplied with oil.
Following the oil debacle, stock markets also experienced heavy losses. The Dow 30, S&P 500, and Nasdaq 100 all lost about 5%, while the European Stoxx 600 dropped a whole 8% earlier, though it has since recovered a little bit. The situation is similar on Asian exchanges too.
Meanwhile, the world continues to wrestle with the coronavirus. Things are beginning to calm down in China and South Korea, the number one and two most affected countries, respectively. But in the EU and North America, cases are on the rise.
Italy, the heaviest-hit country in Europe, is stepping up its quarantine measures, closing down schools, universities, and businesses, and limiting public gatherings in the northern regions. Germany also announced special measures to fight the outbreak.
