Oil prices had one of the biggest
ever falls on Monday, taking the price of Brent crude
to nearly $30 a barrel.
Behind this was an effective collapse
of an agreement between Opec and Russia
to enact production cuts to support the market.
Saudi Arabia, Opec's de facto leader,
wanted deeper and more prolonged cuts
to counter the effect of the spread of coronavirus
on demand.
The International Energy Agency said this week
that oil consumption is expected to contract this year
for the first time since 2009.
Despite this, Russia did not want to team up with Opec,
believing the bigger cuts to production
would only propel rival US shale producers.
So what happened next?
Saudi Arabia started a price war.
Even as the world requires less oil from global producers,
the kingdom said it would put another 2.6m barrels a day
into the oil market.
This triggered a tit-for-tat response from rivals.
Russia said it would add more oil into the market
and so did the UAE.
It's the first time since the 1930s
that we're seeing such a severe demand shock now
combined with a supply shock.
What now?
Oil prices have recovered somewhat
but no one knows how bad this is going to get.
Major oil companies are preparing for a prolonged
period of low prices.
Occidental Petroleum in the US cut its dividend
to shareholders by almost 90 per cent this week.
Energy analysts expect big cuts in capital spending
from some of the world's major companies
and smaller players as their balance sheets take a hit.
Producer countries dependent on oil to fill government coffers
are also on alert.
The last time there was a price crash, in 2014, it was brutal.
Again, the oil market is preparing for the worst case
scenario.