Kapadia Mihir Sun Global Investments

Global Markets Plunge Following Saudi Arabia’s Decision to Increase Crude Production

“Investors have continued to turn to safe havens as global stocks took a drastic plunge on Monday following Saudi Arabia’s unexpected decision to raise its oil production after OPEC failed to reach an agreement with Russia on cutting production. …….

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By Mihir Kapadia, the CEO of Sun Global Investments

The unexpected turn has seen Asian markets turn volatile with Japan’s Nikkei falling as much as 5.1% and Australia, whose market relies heavily on commodities, slide 7.3%, its biggest fall since the 2008 financial crisis. Europe has also followed suit with the London FTSE down 8.46%, the German DAX down 7% and the French CAC joining both in such high losses with little to no chance of a reprieve today.

The biggest hit of the day has unsurprisingly been oil, losing as much as a quarter of its value as Brent crude futures fell 25% to $33.89 a barrel while WTI crude hit lows of $30.16, which is a hit of 27%, as the disintegration of OPEC and its allies paves the way for a price war.

This could see back-and-forth responses between Saudi Arabia and Russia as both look to out-do one another in the oil markets. As a result, we could see oil prices remain considerably low for a while until some form of stability is brought back, however with all that has been going on in the markets lately, this is unlikely to happen for some time.

Another interesting point arising from this is how the Oil price market developments have caused more damage to the markets there were already reeling from the coronavirus. US stock futures are about % lower. The only reason they are not down more is the CME where the Futures trade have a 5% limit.”

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