Oil price fall nears 30%, prompting recession fears
The price of oil fell by more than 30% on Monday, the biggest one-day drop since 1991, after a fallout between major oil-producing nations over production cuts.
Saudi Arabia slashed its prices at the weekend after failing to convince Russia to back sharp production cuts, causing Brent oil futures to reach US$31.02 ($47.10) per barrel.
OPEC members had been meeting with Russia and other non-OPEC members to discuss how to respond to falling demand caused by coronavirus but failed to agree on a production cut, which could have been as much as 1.5 million barrels per day.
James Trafford, analyst and portfolio manager at Fidelity International, said: “We would expect to see a bottoming-out of stocks before the commodity itself, this is because equities are an anticipatory asset class which must look forward to a future recovery, whereas the commodity market has to clear the current supply and demand dynamics.
“A number of factors will weigh heavily on medium-term prices, including whether a political situation can be attained to resolve the apparent OPEC+ standoff and how quickly the virus-hit areas return to normal levels of demand.”
Nigel Green, chief executive of deVere Group, said: “Every major stockmarket is getting hammered as oil prices plunge due to a price war following the breakdown of Saudi Arabia’s oil-cutting alliance with Russia.
“This is an issue that will not be resolved overnight and it can be expected to have far-reaching consequences.
“The ultimate impact that the oil price war will have on an already vulnerable world economy that’s struggling to cope with the spread of coronavirus remains unknown. However, the risk of a short but severe global recession in 2020 has been heightened dramatically.”
AUTHOR
Laura Dew
Recommended for you
A NSW-based adviser has been banned from providing financial services for five years for inappropriate advice and the AFSL of his business has been cancelled by ASIC.
The introduction of Rhombus Advisory has caused a shift in the top advice licensees as Insignia separates its advice business into two channels.
Given the clear divergence between the cost of financial advice and clients’ willingness to pay, two experts explore how advisers can transform the way they convey value to potential clients.
Nearly 18 months since Invest Blue adopted its nine-day fortnight structure to support employee wellbeing, the national advice firm has enjoyed positive results across all metrics.
