Oil prices plunged after OPEC's failure to strike a deal with its allies regarding production cuts caused Saudi Arabia to slash its prices as it reportedly gets set to ramp up production, leading to fears of an all-out price war. John Kilduff, founding partner with Again Capital, joins "Squawk Box" to discuss.
OPEC and non-OPEC allies failed on Friday to agree on how much oil production to cut amid the coronavirus outbreak, with Russia reportedly refusing to give the green light to the deepest supply cuts since the global financial crisis.
Oil prices initially slipped Friday afternoon on reports that Moscow said it wasn’t prepared to approve a further reduction in production. Later, Reuters also reported that OPEC and its allies had even failed to agree on rolling over existing cuts, further weighing on crude prices. Then a statement by the oil group said it would continue discussions and made no mention of any cuts.
Russian Energy Minister Alexander Novak told reporters leaving the meetings in Vienna on Friday that it meant that members could now pump what they liked starting April 1.
“We have made this decision because no consensus has been found of how all the 24 countries should simultaneously react to the current situation. So as from April 1, we are starting to work without minding the quotas or reductions which were in place earlier but this does not mean that each country would not monitor and analyse market developments,” he said.
International benchmark Brent crude skidded to $45.46 Friday afternoon, down over 8%, while U.S. West Texas Intermediate sank to $41.93, also around 8% lower. Both benchmarks were trading at lows not seen since 2017.
Brent futures have fallen more than 30% since climbing to an early January peak, with WTI down almost one-third over the period.
OPEC on Thursday recommended additional production cuts of 1.5 million barrels per day from the beginning of next month until the end of the year. The 14-member group had scheduled a meeting on June 9 to review the policy.
The proposal was conditional on support from non-OPEC producers, including Russia. OPEC cautioned that the deal could only be applied on a pro-rata basis with core members set to cut 1 million bpd and non-OPEC partners expected to cut 500,000 bpd.
Analysts had viewed the meeting between OPEC members and non-OPEC producers, referred to as OPEC+, as crucial.
“It is truly a go big or go home moment for this organization,” Helima Croft, head of global commodities strategy at RBC, told CNBC’s Dan Murphy on Friday morning. “If Russia says no today, there are real questions about the viability of the OPEC+ arrangement.”
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