Oil Market Collapses with 10% Plunge Following Failed Production Cut

[Asia Economy New York=Correspondent Baek Jong-min] International oil prices plunged about 10% on the 6th (local time). Despite demand contraction caused by the novel coronavirus disease (COVID-19), the failure of the production cut agreement is interpreted as triggering a sell-off.

At the New York Mercantile Exchange (NYMEX), April delivery West Texas Intermediate (WTI) crude oil closed at $41.28 per barrel, down 10.1% ($4.62). This is the largest single-day drop in over five years since November 28, 2014.

North Sea Brent crude also suffered a sharp decline, trading down 9.50% ($4.75) at $45.27. The drop in Brent crude was the largest since December 2008 during the global financial crisis.

News that the Organization of the Petroleum Exporting Countries (OPEC) members and non-OPEC oil-producing countries failed to reach an additional production cut agreement ignited the oil price decline. The positions of Middle Eastern oil-producing countries and Russia diverged, causing the additional cuts to fall through.

Moreover, uncertainty over whether to extend the production cuts ending this month has increased, leading to a prevailing outlook that further declines in the oil market are inevitable.