Demand for oil was already reducing due to low global economic growth, which was made worse by the Coronavirus. On Friday, Brent was already trading at US$45 (it was at US$65 two months ago). If the Arabs flood the market with more oil, prices will melt.

Russia has just unleashed what may turn out to be among the ugliest oil price wars in recent history. And Saudi Arabia is fighting back. As the two oil superpowers clash, American oil companies could end up being the biggest victims.

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Russian President Vladimir Putin announced on Sunday that current oil prices are sustainable for the Russian economy. Adding that Russia had the tools to react to any adverse outcome of the spread of the coronavirus on the global financial climate.

“I want to emphasize that for the Russian budget, for our economy, the current level of oil prices is acceptable,” Putin explained at a meeting with Russian energy officials.

Now some oil analysts are predicting low barrel prices, around $20 for the year. Some experts have suggested Russia's move is aimed at targeting US shale producers and retaliating against the US for targeting the Nord Stream 2 pipeline linking Russia and Germany.

Saudi Arabia fought back on Sunday morning using its main weapon, its massive oil reserves. Its latest plans will not only lower its unrefined price to Chinese consumers by as much as $6 or $7 per barrel, but will also increase its daily unrefined production by up to 2 million barrels per day in an increasingly international market. super stocked.

The Saudis' shock move is both market share and a loud signal to Moscow that there is a worthy trade adversary.

Seconds after the market opened on Sunday night, oil prices plunged as much as 30%, sending crude oil to its lowest level in four years. Brent dropped from $45 a barrel to $36,44 at the time of writing, while WTI dropped from $40,45 to $32,97, in one of the worst dips in recent history. .

Sources: Oil Prices and Marcelo Gauto.