International Oil Prices Have Fallen Sharply

- Mar 21, 2020-

International oil prices

Since the outbreak of the epidemic, crude oil demand has slowed and oil prices have been suppressed. Reducing production was originally the most rational approach in oil-producing countries. On March 5, the Organization of Petroleum Exporting Countries (OPEC), headed by Saudi Arabia, proposed to jointly reduce production of crude oil with Russia and other allies in order to deal with the blow to the market caused by the new crown pneumonia epidemic. But Russia rejected the proposal and only agreed to extend the existing production cut agreement, which was due to expire at the end of March. After Russia rejected Saudi Arabia ’s demand for crude oil production cuts, Saudi Arabia launched a crude oil price war, which drastically reduced the price of crude oil sold to markets such as Europe, the Far East, and the United States. The discount rate reached the highest level in nearly 20 years. On the face of it, Saudi Arabia's price cuts and production expansion actions are punishment for Russia's refusal to reduce production. However, the root cause was the oversupply of the international crude oil market during the pneumonia epidemic, and the three countries involved a complicated political and conflicted interest battle.