A stock markets plunged and global oil prices fell off on fears about a COVID-19 resurgence in major countries around the globe - Photo by NYSE Office

JAKARTA (TheInsiderStories) – United States (US) stock market trading halt in a minutes of opening after major indices broke through the level that triggered the New York Stock Exchange’ circuit-breaker. The decision has been taking amid a fresh wave of panic-selling to a disorderly rout in the oil market as Saudi Arabia launched an all-out price war to reclaim market share from Russia and the country’ shale producers.

Trading was halted with the Dow plunged 1,884.88 points or 7.19 percent to 23,979.90 and S&P 500 down 7.1 percent from Friday’ close at 2,762 points. The kingdom signaled it would sharply raise output in a market that is already badly oversupplied due to a coronavirus.

On Monday, the International Energy Agency warned that global oil demand would fall for the first time in a decade this year, having earlier forecast demand growth of some 1.2 million barrels per day (bpd). The resulting 30 percent drop in US crude prices triggered wholesale selling of oil and gas companies stocks.

Earlier, Asian stock markets also fallen sharply, with Japan’ Nikkei 225 index down 5 percent and Australia’ ASX 200 slumped 7.3 percent – its biggest daily drop since 2008. In China, the benchmark Shanghai Composite fell 3 percent and Hong Kong’ Hang Seng index sank 4.2 percent.

As well as the slump in the oil price, Asian investors also reacted to a steep fall in Chinese exports, and figures showing the Japanese economy shrinking at a faster pace than expected. In Indonesia, finance minister, Sri Mulyani Indrawati, admitted she was assessing the impact of a plunge in global oil prices on the 2020 State Budget.

She rated, the drop in oil price caused of “the oil price war” was also triggering capital outflows. Today, the energy and mineral resources ministry last reported the average of Indonesia Crude Price (ICP) in February 2020 stood at US$56.61 per barre. The price lowers compared to January 2020 at $65.38 a barrel.

The ministry stated, the fall in ICP prices was influenced by the decline in global crude oil demand, which caused a fall in the average price of major crude oil in international markets, such as Brent decreased by $8.06 per barrel to $55.44 a barrel.

West Texas Index also declined by $6.99 a barrel to $50.54 per barrel, OPEC basket dropped by 9.33 per barrel to $55.77 per barrel. And Brent (ICE) decreased from $63.67 per barrel to $55.48 a barrel.

The spread of the COVID-19 in various countries has caused concern over global economic conditions and the decline in demand for crude oil. For the Asia Pacific region, the spread of the virus has resulted in the non-operation of public transportation and the low economic activity and make the demand for crude oil is low.

The falling prices were also influenced by slowing economic growth in India. In addition to the spread of the corona virus, the decline in the main crude oil prices on the international market in February 2020 was also caused by negative market sentiment over Russia’ uncertainty about the cartel oil OPEC and its allies plan to carry out additional cuts in crude oil production by 600,000 barrels per day (bpd).

OPEC has projected the global crude oil demand in 2020 will drop by 250,000 bpd to 100.98 million bpd. While, EIA sees the global crude oil demand will drop by 500,000 bpd to 100.1 million bpd in this year.

The agency also released an increase in US crude stockpiles in February 2020 by 8.3 million barrels to 443.3 million barrels compared to January 2020, which also affected the falling prices world oil.

On the latest meeting in Vienna, Austria last week, OPEC and key ally Russia failed to agree  on a cut to oil production that would have contained the plunge in the price of crude caused by the new coronavirus outbreak’ massive disruption to world business.

The oil price fell sharply in international markets as a result, with the international benchmark plunging 9.4 percent, down by a third since the start of the year. The unraveling of the talks in Vienna also underscores the limited power of the cartel to influence world energy markets, unlike its heyday in the 1970s.

OPEC had wanted to cut output by 1.5 million bpd, or about 1.5 percent of world production. Russia and other non-OPEC member have been working with the cartel in recent years and agreed on earlier cuts.

However, the president Vladimir Putin can tolerate low oil prices better than Saudi can and appears reluctant to slash output of its main revenue-making export. Otherwise, Crown Prince Saudi Mohammed bin Salman needs $83.60 per barrel to balance its state budget while Russia needs only $42.40 a barrel.

Even if OPEC and its allies agree on a production cut in the coming days or weeks, analysts say prices are unlikely to rise much. That because the global economy is slowing rapidly and US does not cooperate in its output decisions, has ramped up in recent years, flooding the market and keeping prices down.

investing and BBC contributed to this story

by Linda Silaen, Email: linda.silaen@theinsiderstories.com