Saudi Arabia cuts prices, accelerating turmoil in oil market
Photo: Saudi Arabia cuts oil prices (Getty Images)
Oil prices accelerated their decline after Saudi Arabia cut the price of its flagship crude by the most in 2 years. The escalation of the trade war has heightened fears of a global recession and lower energy demand, Bloomberg reports.
On April 7, Brent crude oil fell by almost 4% to $63 per barrel, a four-year low. Later, prices rose to $64. West Texas Intermediate came close to $60.
The largest oil company, Saudi Aramco, has cut the price of Arab Light crude for its largest buyers in Asia for May. This happened just a few days after OPEC+ announced an unexpectedly large increase in production.
“Markets are beginning the week still in the throes of panic,” said Vandana Hari, founder of Vanda Insights in Singapore. “No one dares pick a bottom” and “stand in the way of the selling tsunami,” she said.
Markets plunge on Trump's tariffs
Oil - along with other industrial and agricultural commodities, as well as stocks - has plummeted as a wave of tariffs and retaliatory measures from China have dented risk appetite. Oil's losses were exacerbated by an unexpected step by the OPEC+ alliance to increase production. The combination of risks to crude oil demand and additional production has raised concerns about a global glut.
Reflecting the rapidly deteriorating sentiment, Goldman Sachs cut its price forecasts for the second time in less than a week. According to the revised forecast, Brent will be $62 per barrel in December, which is $4 less than the previous forecast.
The bank's revision includes a decline in GDP, "including the forecast of a stagnating US economy," analysts said. Risks "remain to the downside, because recession risk has grown further and because OPEC+ supply may rise more than we assume," they said.
US President Donald Trump has been pressing the OPEC+ alliance to "cut the price of oil," which he says is necessary to reduce inflation and increase pressure on Russia to help end its war against Ukraine. Saudi Arabia has also cut prices for the US and Europe, although the reduction was much smaller than for Asian buyers.
"It’s going to remain downhill by default for all risk assets until Trump says or signals something that prompts investors to pause and reassess their recession fears," Hari said.
World oil prices are the main factor that affects the price of gasoline in Ukraine. The drop in prices should result in a 2-3 hryvnia per liter reduction in price tags at gas stations within a few weeks.
