Saudi Arabia has escalated an historic drop in oil prices by cutting its April official selling prices from $14 to $8 in a price war with Russia.
The price reduction comes after the collapse of the oil alliance between Organisation of the Petroleum Exporting Countries (OPEC) and Russia on Friday.
OPEC is a cartel consisting of 14 of the world's major oil-exporting nations.
The reduction in prices comes after OPEC announced on March 6, that it would cut down oil production due to the coronavirus effect to 1.5 million barrels per day in view of the biggest drop in demand.
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According to Reuters, Russia, a key ally of OPEC, wasn’t keen to reduce its production by 500,000 barrels a day and refused to go along with OPEC's efforts to rescue the coronavirus-battered oil market by cutting production.
The failure of a meeting at the OPEC headquarters in Vienna, Austria, left the oil industry shocked, sparking significant drops in oil prices Friday.
Oil prices were already stuck in a sluggish market because of the coronavirus outbreak that has caused demand for crude to fall sharply.
Consequently, US oil prices crashed as much as 27 per cent and are now selling at $30 (Sh300) a barrel as traders anticipate Saudi Arabia to flood the market with crude in a bid to recapture market share.
According to Refinitiv statistics, a financial technology consulting company, the last experience of a drop in oil prices was in 2001 when the prices plunged by 15 per cent.
Russia's decline to cut production amounted to a slap to US oil producers, many of which need higher oil prices to survive.
