Oil prices witnessed a historic collapse as Saudi Arabia launched a price war against Russia. The move came after the refusal of Russia to cut down the oil production to rescue the oil market hit by coronavirus outbreak. Saudi Arabia which is one of the largest oil producers in the world is planning to raise its oil production and offer deep discounts on oil prices in a bid to gain new customers.
Oil prices suffered a massive down by over 30 percent as the market opened on Sunday evening, resulting in the four year low of crude oil prices.
Brent crude, the international benchmark, dropped from $45 a barrel to $31.02 a barrel which is one of the biggest one-day price drops in history. “It is very rare for a demand collapse to coincide with a supply surge. It is the most crude price-bearish combination since the early 1930s. The price collapse has just begun,” said Bob McNally at the Rapidan Energy Group.
India Likely to Benefit
This massive price drop will have a positive effect on India’s economy that is crippling with the slowdown. As India’s majority of oil imports are from Saudi Arabia, this move from the kingdom county will help India save a lot of spending on the oil imports. Analysts are predicting a disruption in the energy markets that will help major consumers such as India manage inflationary and fiscal pressures. India has spent $111.9 billion on oil imports in FY19. Oil marketing companies, tyre industry, synthetic fibre businesses, which use oil derivatives like paints, producers of lubricants, transformer oils, plastic products, soaps and detergents, etc. as core inputs are likely to benefit from the crude oil price drop. Opec which is led by Saudi Arabia accounts for around 83 percent of the total crude imports of India and around 40 percent of the global output. India with an installed capacity of more than 249.4 million tonnes per annum is considered to be a key refining hub in Asia.