Oil shares were decimated in London this morning after a crude price war erupted between Saudi Arabia and Russia.
Eight of the “top 10 fallers” on the London Stock Exchange were energy companies this morning.
Premier Oil one of the hardest hit, suffering a 55% drop to 27.8p, while Tullow Oil sank 36% to 15p.
Others on the list were oilfield services firm Hunting, down 20% to 216p, Cairn Energy, 20% lower at 96p, and BP, down 18% to 323p.
EnQuest dropped 17% to 15p and Shell, which wasn’t on the top fallers list, sank 14.5% to £13.65 per share.
Brent crude, the global benchmark, fell by more than 30% to just above $30 per barrel this morning, its sharpest one-day decline since the Gulf War of 1991.
It was down 21.82% to $35.39 per barrel as of 10:30 am.
The coronavirus outbreak has reduced demand for oil and gas at a time when the market is already oversupplied.
Oil producers and service firms were hoping the Opec cartel and its allies, led by Russia, would stabilise prices by agreeing to deepen production cuts by 1.5 million barrels per day (bpd) at a meeting in Vienna on Friday.
But the alliance between Saudi Arabia, Opec’s main power broker, and Russia collapsed spectacularly, with Moscow arguing it was too early to assess the lasting impacts of the virus on demand.
Not only were deeper reductions rejected, there was no agreement to prolong existing cuts of 2.1m bpd which are set to expire at the of this month.
Saudi Arabia signalled over the weekend that it was ready to ramp up production in an effort to bring Russia, whose currency has tumbled, back to the negotiating table.
Michael Burns, energy partner at law firm Ashurst, said: “This new oil price war is creating even more uncertainty in a market already hit by that created by coronavirus. It is hoped that good sense will prevail and the present impasse between producing countries can be resolved as soon as possible.”
Callum Macpherson, Investec’s head of commodities, said: “What else could possibly go wrong for oil in the coming weeks?
“After the failure of the Opec meeting and Saudi Arabia cutting its selling prices indicating it intends to compete to supply, there are two things that could make matters even worse.
“One – general Haftar succeeds in taking Tripoli, bringing the civil war in Libya to an end – his next step would likely be to restore oil production, bringing another 1m bpd back into the market that nobody needs.
“Two – coronavirus disrupts the US driving season. If the virus does not dissipate over the summer, and the US driving season is disrupted, the consequences for demand could be very serious indeed.”
More to follow.