NEW YORK (Reuters) – Oil Brent suffered its biggest daily drop in more than 11 years on Friday, after Russia opposed broad production cuts suggested by the Organization of the Petroleum Exporting Countries (OPEC). Although it was intended to stabilize commodity prices amid the coronavirus epidemic, OPEC retaliated by removing its own pumping limits.
More than 1 million WTI crude contracts were traded during the day after the three-year-old Russia-OPEC pact collapsed.
Prices plummeted
“Prices have plummeted because the OPEC meeting turned out to be an epic failure on the part of everyone involved. Russia has clearly decided to take a scorched-earth approach to the oil market. Although every country for itself,” said John Kilduff, partner at Again Capital in New York.
Brent crude futures posted their biggest one-day percentage drop since December 2008, closing down $4.72, or 9.4%, at $45.27 a barrel. That was the lowest close for Brent, the international benchmark, since June 2017.
US crude, WTI, fell $4.62, or 10.1%, to close the day at $41.28 a barrel, its lowest closing level since August 2016 and the biggest daily percentage drop since November 2014.
More than 4.58 million front-month WTI contracts changed hands this week, the busiest in history for the maturity.
Both Brent and WTI have accumulated losses of more than 30% year to date.
Split between OPEC and Russia
The split between OPEC and Russia has revived fears over the 2014 oil market crash. However, the Saudis and Russians have been fighting for market share with U.S. producers, who have never been part of supply-limiting agreements, have been unable to keep up with the current economic crisis.
OPEC had been pushing for additional production cuts of 1.5 million barrels per day by the end of 2020.
The deal would take total output cuts by OPEC+, the alliance between OPEC, Russia and other countries, to a total of 3.6 million bpd, or about 3.6% of global supply.
“(From April 1) all oil producers will be able to produce as much as they want,” analysts at ABN Amro said in a report. The Dutch bank cut its 2020 Brent price forecast by 15.5% to $49 per barrel.
The bank noted, however, that OPEC Secretary General Mohammad Barkindo has indicated that there will be more informal meetings on the proposed cuts in the coming weeks.
ABN Amro cuts Q1 Brent crude price projection to US$1.40/barrel
Brent production
(Reuters) - ABN Amro on Friday cut its forecast for the price of Brent crude at the end of the first quarter of 2020 to $40 per barrel from the previously forecast $60 per barrel.
The institution also lowered its estimate for the average price of Brent in 2020 to $49 per barrel, from $58 per barrel previously seen. Meanwhile, the projection for the average price of US crude (WTI) this year was reduced to $43 per barrel.
“Due to the decline in global oil demand, combined with the already existing oversupply, which is likely to grow further, oil prices are therefore likely to remain lower for longer,” ABN Amro said.
This Friday, after Russia opposed the production cuts suggested by the Organization of the Petroleum Exporting Countries (OPEC). In order to stabilize commodity prices, quotations fell by around 10%. Both Brent and WTI have accumulated drops of more than 30% in 2020.