03 Apr 2020

OIL TRADE WAR

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Today, all countries in the world are facing difficulties in the economy. After the World Health Organization (WHO) announced that the status of the COVID-19 outbreak became a pandemic, the world economy has declined. In addition, there is a phenomenon of low oil prices and falling stock prices on world stock exchanges. Specifically for the decline in oil prices, the incident on March 9, 2020, was the highest decrease in the day since 1991 (Aljazeera, 2020). On that day, world crude oil prices fell. Western Texas Intermediate (WTI) crude oil prices traded in the United States have decreased by 26% to 31.13 USD / barrel. The price of Brent crude oil, which is the global benchmark, fell around 24% to 33.36 USD / barrel. It has been up for a while, but on March 12, 2020, oil prices were down 4.2% from the previous day to 31.60 USD / barrel. Price of Brent fell 8% to 32.97 USD / barrel (Figure 1). The fall in oil prices was due to Saudi Arabia starting an oil price war as part of a trade war with Russia. This resulted in a collapse of the supply chain and prompted global oil buyers to panic during a crisis of the COVID-19 pandemic outbreak.

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