Stock indexes in the Middle East plummeted at the start of trading on Sunday

SMM News: with the spread of the epidemic in the Middle East intensified, the geopolitical situation in the Middle East is also a resurgence of variables. The oil war began on Saturday, and the Middle East stock index fell sharply on Sunday.

OPEC has been negotiating a three-year deal with Russia to cut production after Russian President Vladimir Putin went on the sidelines and agreed to a cut in production.

Unexpectedly, talks between OPEC and Russia on expanding oil production fell apart on Friday, and Moscow refused to support further cuts in production to deal with the impact of the new crown virus epidemic. In response, Saudi Arabia on Saturday waged a war on the oil market, slashing not only the price of crude oil sold to foreign markets such as Europe, the far East and the United States, but also announced that it would immediately increase oil production to more than 10 million barrels a day.

Affected by the news, stock markets in the Middle East tumbled on Sunday, the Saudi TASI composite index fell more than 7 per cent, Saudi Aramco, the world's most profitable company, fell by the limit at the start of trading, and the Kuwaiti stock market "fell by the limit" to trigger a circuit breaker. Some expect oil prices to fall to $20 a barrel and the nightmare of 2014 may return.

Stock indexes in the Middle East plummeted at the start of trading on Sunday

Kuwait stock market "falls to the limit" fuse

Stock indexes across the Middle East tumbled at the start of trading on Sunday. Of these, the Saudi TASI index fell 7.15 per cent at the start of trading, falling as low as 6883.3 points, down nearly 7.76 per cent from the previous session's close.

In terms of major components, Saudi Aramco, the Saudi state-owned oil company, fell 4.85 per cent to below 32 rials IPO at the start of trading. Subsequently, Saudi Aramco's decline continued to expand, the biggest intraday decline of 6.52%, the share price once hit 30.85 rials, the lowest since listing at the end of last year.

With the exception of Saudi Arabia, stock markets in the Middle East, including the United Arab Emirates, Egypt and Qatar, fell sharply after the start of trading on Sunday. The Abu Dhabi ADX composite index fell more than 300 points, or 6.81 per cent, in early trading.

Dubai's DFM index, another big index in the United Arab Emirates, tumbled 8.6 per cent to 2249.05 points at the start of trading.

In Egypt, the Cairo EGX30 index fell nearly 500 points, or more than 3.5%, at the start of trading, while the EGX 100 index also fell more than 2%.

The Doha index of Qatar fell 4.1 per cent at the start of trading, hitting a minimum of 8928.02 points. The; QE All Shares index fell more than 3 per cent.

As of press time, the decline in the Middle East stock index widened, with the Kuwait KWSEMP index falling more than 10 per cent in intraday trading, triggering a circuit breaker. The Kuwait Stock Exchange announced the suspension of all trading for the rest of the day.

It is worth mentioning that this is the second time that the index has triggered a circuit breaker since March. On Sunday, Kuwaiti stocks tumbled 11% in the 30 minutes after the opening of trading on Sunday morning, the biggest intraday decline on record, as investors worried about the spread of the new crown in the Arabian Gulf region. All trading for the rest of the day was suspended after triggering the circuit breaker.

As of press time, Saudi Arabia's decline had widened to 8.4 per cent, while the Cairo EGX30 index was down more than 4 per cent.

Saudi Aramco shares also fell all the way, falling more than 7.4% and hitting a minimum of 29.9 rials.

OPEC and Russia expand Oil production and collapse

Saudi Arabia launches oil price war

Behind the overall decline in the main stock indexes in the Middle East is the oil price war that has already begun. Talks between OPEC and Russia collapsed on Friday and failed to reach an agreement to cut production by 1.5 million barrels a day.

The spread of the epidemic has heightened concerns about weak demand for crude oil, with international oil prices falling and entering a technical bear market in early February. Saudi Arabia, the largest oil producer in the OPEC, has been urging the OPEC and its Russian-led allies to cut production further to support oil prices.

OPEC+ 's current oil production reduction agreement expires at the end of March. OPEC said in a statement on Thursday that it would recommend to OPEC+, including Russia, an additional 1.5 million barrels a day until the end of 2020, equivalent to about 1.5 per cent of global demand. However, the proposal can only be implemented with the support of non-OPEC oil-producing countries.

However, talks on the expansion of the OPEC+ (Organization of Petroleum Exporting countries and allies) in Vienna on March 6, local time, failed because of a Russian boycott of Saudi Arabia's push for further production cuts.

On Saturday, Saudi Arabia quickly launched a "full-scale war on oil prices." First, Saudi Arabia slashed the price of crude oil sold to foreign markets such as Europe, the far East and the US, the biggest discount in more than two decades, to attract foreign refineries to buy Saudi crude. The declaration file shows:

The price of crude oil sold to Asia in April was cut by $4-6 a barrel;

The price of crude oil sold to the United States in April was cut by $7 a barrel;

These are unprecedented discounts. Most strikingly, the discount on flagship Arab light crude oil sold to refiners in Northwest Europe expanded to $8 a barrel and sold for as little as $10.25 a barrel. By contrast, Russia's similar crude oil can only be cut by about $2 at the most.

The cut comes as Saudi Arabia privately informs market participants that production could rise from about 9.7 million b / d this month to 10 million b / d in April, or even reach a record level of 12 million b / d, if necessary.

International oil prices plunge 10%

Stimulated by the news of the collapse of the talks on expanding oil production, the oil distribution in the United States plummeted and oil stocks fell across the board.

By the end of the day, London Brent crude futures, the global oil market benchmark for May delivery, were down $4.72, or 9.44 per cent, at $45.27 a barrel, the lowest closing price since June 2017. (WTI) crude for April delivery on the New York Mercantile Exchange fell $4.62, or 10.07%, to $41.28 a barrel, its biggest one-day drop since November 2014.

Oil stocks fell across the board, with ExxonMobil down 4.87%, ConocoPhillips down 4.97%, Royal Dutch Shell down 4.25% and Schlumberger down 7.67%.

It is worth mentioning that during the price war in 2016, oil cloth reached $27.10 a barrel; in the worst case, it fell to an all-time low of $9.55 in December 1998.

Oil prices are expected to fall to $20 a barrel

A number of international agencies believe that the international price of crude oil is likely to fall from the current $45 to about $20, or even to about $10.

One question of global concern at this time is whether the nightmare of the 2014 oil price collapse will repeat itself. It is well known that at the time, Saudi Arabia and Russia competed for market share with US shale oil producers who had never participated in the cut-off agreement, resulting in a sharp increase in prices, when sales revenue was no longer enough to cover the cost of shale oil, forcing many US shale oil producers to go bankrupt, falling to $25 in late 2015 and early 2016.

But then shale oil survived by borrowing. OPEC later had to woo Russia to cut production. To this day, the crude oil world is still paying for Saudi Arabia's decision that year.

This year, the latest data show that Brent crude has fallen about 1/3 to its lowest level since 2017, at $45 a barrel, as the outbreak curbed corporate activity and brought travel to a standstill. The global economy is in trouble, putting countries and many oil companies dependent on oil revenues under heavy pressure.

Under this pressure, the health of Russia's state finances is shaky.

Why didn't Russia agree to a production cut? Russia is clearly targeting the layout of shale oil in the United States, fighting a battle for control of international crude oil prices.

In the week to March 6, a total of 682 oil wells were drilled in the United States, up from 678. In recent years, US shale oil production has increased steadily, crude oil production has increased substantially, and gradually occupies the position of the world's largest oil producer, which has not only strengthened the pricing power of international crude oil, but also ensured domestic crude oil supply and control inflation, which is beneficial to strengthening the petrodollar system and stabilizing the economy of the United States. at the same time, it has also dealt a blow to the financial revenues of Russia, Iran and other countries in international strategy.

According to a number of foreign media reports, Russian Energy Minister Novak told reporters after marathon consultations at OPEC headquarters in Vienna on Friday that "from April 1, neither OPEC nor non-OPEC oil producing countries will any longer limit production."

Asked if Saudi Arabia had plans to increase production, Prince Abdul Aziz, the energy minister, said, "I will always hang your appetite."

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