The turmoil comes after OPEC and Russia failed to reach an agreement on lowering oil production quotas. Russia evening refuted the Saudi Aramco-led proposal to prop up the coronavirus-hit oil market by further reducing production. The standoff sparked a 10% drop in prices on Friday.
Angered by Russia’s refusal, Saudi Aramco escalated the situation further by cutting its April selling prices by $6 to just $8, in an effort to put pressure on Gazprom and retake market share. The Saudis also announced to raise its production in April to more than 10 million barrels per day, apparently to compete with Russian oil in Europe as well as Asia.
Targeting US shale oil producer
Analysts noted that Gazprom had hinted that the real target of the price ware would be U.S. shale oil producers, because OPEC and Russia are “fed up with cutting output and just leaving them with space.“
Sustained low oil prices could cause dozens of U.S. upstream companies to file for bankruptcy, similar to the situation during the 2014-16 oil crash.
West Texas Intermediate (WTI) crude, the main U.S. oil benchmark price, dropped to $30.12 per barrel on early Monday. At the New York Mercantile Exchange (NYMEX), meanwhile, the front-month gas future was at $1.62 per MMBtu and the Henry Hub day-ahead price was last seen at $1.73 per MMBtu.
Little effect on JKM spot LNG price
On the spot gas market, the plunge in oil prices had little effect the Japan-Korea Marker price for Asian spot LNG which is already at a seasonal low due as markets are awash with natural gas. The Platts JKM spot LNG price for Asia was last seen at $3.11 per million British thermal units
In the UK, the National Balancing Point (NBP) was last at $2.85 per MMBtu, while the main natural gas price in Continental Europe, the Dutch Title Transfer Facility (TTF), was at $2.90 per MMBtu.