Oman crude plummets to $33.3/barrel

Oman’s benchmark crude plunged 32 per cent to $33.30 a barrel at the close of trading on the Dubai Mercantile Exchange (DME) on Monday, mirroring a collapse in global oil benchmarks triggered by a potentially catastrophic oil war between heavyweights Russia and Saudi Arabia. The marker price of the Oman Crude Oil Futures Contract (OQD) lost $15.70 per barrel in the steepest one-day fall it has witnessed since it made its debut as the flagship futures contract on the DME in June 2007. This compares with a marker price of $49.00 per barrel on Friday, March 6, 2020, for deliveries in May 2020. The lowest settlement price the Omani benchmark was $23.72/b on January 21, 2016, at the height of the last oil price collapse that began in late 2014. At the other end of the spectrum, the highest settlement price of $141.27/b was recorded on July 4, 2008 preceding the global financial crisis. Local experts have attributed the steep decline to the unraveling of the Opec+ alliance and the ensuing ‘price war’ between Riyadh and Moscow. “This drop is the worst for global oil prices since 2016, and the fastest since the Gulf War,” lamented Ahmed Said Kashoob, Head of Investments — Public Markets, Tanmia. “The oil market clearly imploded when Russia apparently refused to go along with Opec’s proposal to cut production. Prices plunged by as much as 10 per cent on Friday, 6th March, but Saudi Arabia aggravated the situation by dropping its selling prices in order to gain back market share.” In comments to the Observer, Kashoob noted that the outlook is not very promising for a speedy resolution of the crisis. “It remains to be seen whether Saudi Arabia and Russia get back to amicably stabilising the oil market. Continuing uncertainty heralds more turbulent times, with estimates of oil at $20 floating in the market,” he remarked. U-Capital’s CEO Loai Bataineh however is optimistic that oil prices will eventually rebound. “It’s an intra-day drop which is in reaction to the collapse of the OPEC+ alliance. Demand-wise, there is a drop but not to the extent which justifies a 30 per cent one-day drop. We see oil prices recovering soon and averaging between $50-60 for the year 2020.” Bataineh further added: “Also at these levels the 8-10m bpd of oil production from shale producers will be out, which will aid in the supply demand balance as well. We expect Opec and non-Opec producers to call a meeting soon to sort out their issues as such prices don’t benefit anyone.”