By Barani Krishnan
Investing,com – Oil prices closed 10% lower on Friday in one of the market’s worst crashes that sent U.S. crude to four-year lows after Russia refused to back Saudi Arabia and other allies in OPEC on deeper production cuts to offset demand lost to the coronavirus.
, the benchmark for U.S. crude prices, settled down $4.62, or 10%, at $41.28 per barrel. WTI earlier fell to $41.05, its lowest since April 2016. For the week, it fell nearly 8%.
, the London-traded global benchmark for crude, lost $4.72, or 9.4%, to close at $45.27. Brent slumped to $45.19 earlier, a bottom since July 2017. For the week, it fell 10%.
OPEC+, which includes Russia and other oil producing countries that aren’t outright members of the cartel, issued a statement after talks in Vienna, saying it would continue consultations to stabilize the oil market.
But missing was any mention of deeper cuts of some 1.5 million barrels per day sought by group lynchpin Saudi Arabia. The Saudis were supposed to have come up with 1 million bpd of that and the Russians the balance. OPEC+ already has a separate deal to reduce up to 2.2 million bpd until the end of March.
“Despite the expectation that Russia was just trying to play coy with the market for maximum market effect … their resistance to production cuts is real,” said Phil Flynn, analyst at the Price Futures Group brokerage in Chicago.
But some traders think the Russian resistance is a calculated move to bleed dry U.S. shale oil producers, who aren’t a part of OPEC+ and who have been producing at record levels while enjoying price support from the alliance’s actions and grabbing market share from Saudi-Russian cuts. OPEC+ cuts have been going on for more than three years now.
“Russia was content in being the Bond villain in what appears to be the last movie in the three-year series called OPEC+,” said Ed Moya of online trading platform OANDA.
“The Russians can now live with $40 a barrel oil and it seems they are willing to stomach even lower prices in the short term to see the industry consolidate,” Moya said. “Russia’s endgame could be to gain market share in 2021 when global demand returns to normal (and) see some U.S. shale drillers go out of business, or if OPEC eventually capitulates without them.”
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.