JUST IN: Oil Prices Suffer Historic Collapse, Crashes To 33% Loses 11%

Oil prices suffered a historic collapse overnight after Saudi Arabia shocked the market by launching a price war against onetime ally Russia.

Brent, against which Nigeria’s crude is priced, fell by $11.62 to $33.45 as of 9.00 am Nigerian time on Monday. It earlier dropped to $31.02, it’s lowest since February 12, 2016, according to Reuters.

Crude was recently trading down 27% to $30.04 a barrel. Brent crude, the global benchmark, plunged 26% to $33.49 a barrel. Both oil contracts are on track for their worst day since 1991, according to Refinitiv.

The shock to oil also rattled stock markets, which were already in a panic because of the novel coronavirus outbreak.

The market in Asia plunged during Monday trading, while US futures recorded massive declines. In Europe, the FTSE 100 (UKX) plunged 8.5%, with BP (BP) down 20%, while Germany’s DAX (DAX) was down 7.4% and Italy’s main index fell 7%.

The turmoil comes after the implosion of an alliance between OPEC and Russia, which had been restraining oil supply since the start of 2017 in an attempt to support prices.

Russia refused to go along with OPEC’s proposal to rescue the coronavirus-battered oil market by further cutting production at a meeting in Vienna on Friday. The standoff left the oil industry shell-shocked and sparked a 10% plunge in oil prices Friday. Crude oil was already stuck in a bear market because of a sharp drop in demand linked to the coronavirus outbreak.

Saudi Arabia escalated the situation further over the weekend. The kingdom slashed its April official selling prices by $6 to $8, according to analysts, in a bid to retake market share and heap pressure on Russia.

“The signal is Saudi Arabia is looking to open the spigots and fight for market share,” said Matt Smith, director of commodity research at ClipperData. “Saudi is rolling up its sleeves for a price war.”

Analysts said that Russia’s refusal to cut production amounted to a slap to US shale oil producers, many of which need higher oil prices to survive.

“Russia has been dropping hints that the real target is the US shale oil producers because it is fed up with cutting output and just leaving them with space,” analysts at energy consulting firm FGE wrote in a note to clients Sunday. “Such an attack may be doomed to failure unless prices remain low for a long time.”