Brent crude fell to $30 per barrel on Tuesday as Saudi Arabia took matters a step further in the oil war with Russia as it announced reasons to ramp up production to 10 million barrels per day.
This is coming in a period the oil market has been impacted heavily by the coronavirus, which has forced governments to close its borders, leading airlines to cut the number of flights daily.
Last night, the Brent traded down by 4.2 percent or $1.33 to precisely sell at $30.36, while the US West Texas Intermediate (WTI) crude futures was down by 6.17 percent or $1.77 at $26.93 per barrel.
With a growing number of countries going into lock-down, oil markets are facing an oil glut as the drop in demand is coinciding with a supply flood as Saudi Arabia and Russia intensify their price war for market share.
According to reports, Saudi Arabia’s Energy Ministry issued a statement on Tuesday, revealing that “Saudi Arabia will utilize the gas produced from the Fadhili gas plant to compensate for around 250,000 barrels a day of domestic oil consumption, which will enable the Kingdom to increase its crude exports during the coming few months to exceed 10 million barrels a day.”
It was noted that Saudi Arabia may struggle to free up more crude oil for exports in the next couple of months as power consumption is set to increase during the hottest months of the year in the country which runs from May to September.
The market is charting in the lowest region in five years and with Saudi Arabia, Russia, and UAE contributing cheap oil aggressively to the market, pressure will continue to pile on economies already in a tight spot as a result of weakened demand.
There have been warnings of a looming recession as many analysts have reviewed projected prices again. The investment bank, Goldman Sachs, slashed its price outlook for Brent to $20 per barrel, while WTI was posted to trade at $22 per barrel in Q2.
Goldman has cut estimates multiple times in the last few weeks. The firm previously lowered its target for WTI to $29 and Brent to $30 after the breakdown in talks by members of the Organisation of the Petroleum Exporting Countries (OPEC) and its allies earlier in early March.
The firm also said that the sudden drop-off in demand, which began in January when the virus started hitting Chinese fuel demand, aided the price war that’s broken out between OPEC and its allies, which includes Russia.
