The Saudi decision follows the refusal of Russia to join a plan from OPEC to cut oil supplies to increase prices.
Rabat – Crude oil prices reached a historic low since the 1991 Gulf War after Saudi Arabia slashed export oil prices and announced the intention to begin production next month.
Prices of Brent crude stood at $33.09 a barrel today, representing a fall of 27%, according to the Guardian.
Saudi Arabia’s move comes after Russia declined on March 6 to join the Organization of the Petroleum Exporting Countries (OPEC) in cutting oil supplies aimed at increasing prices.
The Saudi-led OPEC plan to cut oil supplies was in response to a lack of demand, especially from China, amid the outbreak of the novel coronavirus (COVID-19).
The International Energy Agency (IEA), an institution responsible for monitoring the security of global oil supplies, warned that the global demand for oil will continue to shrink for the first time in a decade due to the economic impacts of COVID-19.
In a press release, deVere Group, the largest independent financial advisory and services organization, warned of a global recession.
“A global recession is now almost inevitable this year,” said the group’s CEO, Nigel Green.
“Oil’s sharpest one-day drop since the 1991 Gulf War has further fuelled the sell-off in global stock markets that started a couple of weeks ago on fears that coronavirus is going to severely damage economic growth,” Green continued.
He warned that the issue of oil prices will not be resolved overnight, emphasizing that the crisis comes at a time when the world “scrambles to deal with the market mayhem and economic fallout caused by the relentless global spread of coronavirus.”
The outbreak of the virus has had a significant impact on the world’s economy. Green believes that the epidemic has “already sent the stock market into bots of volatility not seen since the 2008 financial crisis.”
Entire powerhouse cities in Asia and Europe are almost shut down, the deVere CEO added.
COVID-19 is also expected to severely impact multinational companies’ profits.
“We can see both supply and consumer demand are already being impacted in key sectors, such as travel and tourism, hospitality, manufacturing, and retail, and it is going to extend to others,” Green said.
In addition to the economic impact, coronavirus is causing thousands of fatalities and infections on a daily basis.
Mainland China continues to lead in infections and fatalities, with more than 80,000 confirmed cases and well over 3,000 deaths.