OPEC and non-OPEC members’ met to discuss oil supply cuts amidst Coronavirus fears. However, Shares of Saudi Arab state oil company Aramco for the first time reached below its original IPO price on 8th March at 30.90 riyals ($8.24) after the meeting failed at putting curbs on oil supply. Its listing price was 32 riyals in December which is now down by 6.36%.
Crux of the Matter
Run on the Oil? The ongoing coronavirus has increased investors’ fears. Amidst that, OPEC and non-OPEC members could not finalize a supply cut in oil production leading to a 7.7% fall in Tadawul, Saudi Arabia’s stock exchange. As OPEC and non-OPEC allies failed to decide, Russia also reportedly refused to allow supply cuts. Russian Energy Minister Alexander Novak after series of meetings in Vienna on March 6 said that members could now pump what they liked starting April 1. On March 5, 2020, OPEC proposed additional production cuts by both, OPEN and non-OPEC members of 1.5 million barrels per day (bpd) for the first half of 2020. The conditional proposal is based on the support of non-OPEC producers which also includes Russia.
OPEC also warned that the deal could only be applied on a pro-rata basis with core members set to cut 1 million bpd and non-OPEC partners expected to cut 500,000 bpd. Iranian Oil Minister Bijan Zanganeh said, “the group had no plan B if Russia or any other non-OPEC members refused to accept the deal.”
Oil markets crash more than 30%—the most since the 1991 Gulf War—as disintegration of OPEC+ alliance triggers price war between Saudi Arabia and Russia More: https://t.co/si4nBBOPhu pic.twitter.com/CyfKfxqv05 — Bloomberg (@business) March 9, 2020
Fallout This had a global impact wherein stock markets fell dramatically. The Abu Dhabi index fell 5.8%, Dubai’s Financial Market General Index was down 7.47% and Kuwait’s premier market index also went negative by 10%. International and U.S. oil benchmarks reached multiyear lows with Brent crude closing at $45.27, down more than 9% and U.S. West Texas Intermediate fell more than 10% lower to $41.28 which is its lowest level since 2016.
Curiopedia
The Organization of the Petroleum Exporting Countries is an intergovernmental organization of 14 nations, founded on 14 September 1960 in Baghdad by the first five members, and headquartered since 1965 in Vienna, Austria. The stated mission of the organization is to “coordinate and unify the petroleum policies of its member countries and ensure the stabilization of oil markets, in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers, and a fair return on capital for those investing in the petroleum industry.” The organization is also a significant provider of information about the international oil market. The current OPEC members are: Algeria, Angola, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, the Republic of the Congo, Saudi Arabia, the United Arab Emirates and Venezuela. Ecuador, Indonesia and Qatar are former members. More Info
Saudi Aramco is a Saudi Arabian national petroleum and natural gas company based in Dhahran, Saudi Arabia. It is one of the largest companies in the world by revenue, and according to accounts seen by Bloomberg News, the most profitable company in the world. Saudi Aramco operates the world’s largest single hydrocarbon network, the Master Gas System. Its 2013 crude oil production total was 3.4 billion barrels (540,000,000 m3), and it manages over one hundred oil and gas fields in Saudi Arabia, including 288.4 trillion standard cubic feet of natural gas reserves. Saudi Aramco operates the Ghawar Field, the world’s largest onshore oil field, and the Safaniya Field, the world’s largest offshore oil field. More Info
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