The 178th extraordinary meeting of OPEC and OPEC+ in Vienna ended on Friday with no deal between OPEC and Russia who disagreed on introducing on deeper cuts beyond the end of March that resulted in oil prices initially falling by 10 per cent on Friday and on Monday morning by a dramatic 30 per cent.
The no deal outcome was not expected and is the most serious rift between Saudi Arabia and Russia and the more than 20 other nations that created the OPEC+ alliance in 2016.
OPEC ministers had on Thursday said they would back an additional 1.5 million bpd of oil cuts until the end of 2020, in addition to rolling over existing cuts of 2.1 million bpd. That would have meant removing a total of about 3.6 million bpd from the market, or 3.6 per cent of global supply.
"The Heads of Delegation of the OPEC Conference held further consultations and decided to recommend extending the duration of the proposed 1.5 million barrel per day additional adjustment until the end of 2020, instead of 30th of June 2020," OPEC said.
On Friday though it became clear that Russia was not willing to go ahead with a deeper production cut and rejected the proposal. Instead Russia implied that it was only willing to extend existing OPEC+ cuts of 2.1 million bpd, which were due to expire at the end of March for a few more months to end of June 2020.
This proposal from Russia was rejected by OPEC who decided to refuse an extension of the existing cuts meaning that OPEC members and non-OPEC producers can increase their output to whatever level they want from April 1st.
The reaction from the market was swift and dramatic with oil prices dropped by 10 per cent on Friday. Oil has now lost about a third of its value this year, tumbling towards $45 a barrel, its lowest since 2017.
On Saturday, Saudi Arabia signalled that it was pursuing a new aggressive tactic as it went ahead with plans to cut prices of its own crude. Saudi slashed the pricing for its crude for foreign markets and offering big discounts for buyers in Asia, Europe and the U.S. to entice refiners to purchase Saudi crude at the expense of other suppliers. The oil price war that Saudi Arabia is pursuing hit the markets hard on Monday morning with brent crude prices plunging by 28% to $32.