Oil prices have fallen dramatically after Saudi Arabia’s massive discount in price of oil of $6-$8 per barrel to it’s counterparties which include Asia, United States and Europe.
Saudia Arabia, who is the world’s biggest oil exporter is increasing its crude production after Russia’s refusal to join OPEC’s plan to cut oil supply.
Brent Crude Oil futures fell by 30% Sunday evening before recovering to a drop of 25%. Saudi Arabia’s decision is a stunning reversal from a couple of days ago when it said it was cutting oil production.
In addition, coronavirus scare is also affecting oil production as on Friday, oil fell 10% to $45 per barrel. This higher production of oil is likely to push down oil prices even further, hurting economies that oil exporters.
Canadians are likely to see lower prices at the gas stations but our neighbour in the south is likely to be hurt by the oil price decline. Alberta’s government recent budget forecasts WTI will average $58 US a barrel this coming year.
Reduction in oil prices is a welcome sign for the airline industry who have cut their flights dramatically over fears of coronavirus. As more and more passengers are staying home, this should help reduce their expenses.
