Late last week, talks between oil cartel Organization of Petroleum Exporting Countries (OPEC) and Russia collapsed as the two sides failed to agree on an output cut deal. This pushed Saudi Arabia, the world's largest oil producer, to cut its crude prices and announce increase production leading to a mayhem in an already over supplied oil market.

 

Brent crude prices fell to $31 per barrel earlier in the day. Currently Brent crude futures have recovered and are currently around $36.76 per barrel. The West Texas Intermediate (WTI) crude is around 19 per cent lower at $33.29 per barrel.

 

Further, Urals oil was trading at $31.2 per barrel. Urals oil is a mix of heavy sour oil of Urals and the Volga region with light oil of Western Siberia. Not just oil prices, natural gas prices have also fallen to $1.644 per MMBtu.

 

The fear in the market now is that oil prices may crash further as Saudi Arabia is taking an aggressive stance and is expected to flood the market with crude in a bid to recapture market share. Analysts have said that Saudi Arabia had slashed its April official selling prices by $6 to $8 a barrel in a bid to retake market share and heap pressure on Russia.

 

The global developments on oil bore well for India that imports 83 per cent of its domestic oil requirements. Analysts said that the country could save over $30-40 billion in its oil import bill if the current prices hold on for longer during 2020.

 

This fiscal's oil import bill is also expected to fall from the gains on prices in the last two months of the financial year. In a tweet on Sunday Kotak Mahindra Bank managing director and CEO Uday Kotak said: "Amidst turbulence and the virus, some good news - oil at $45/barrel. Recent $20 drop saves India $30 billion per annum. Also global interest rates have collapsed making money cheap. Let's leverage these for policy to boost growth."

 

The current crude oil prices are just above the decadal low of $26 a barrel in early 2016 with analysts fearing that it may touch that level soon. The failure of OPEC-Russia deal on production cuts has the genesis in the growing prowess of the United States in oil export market.

 

Russia has been dropping hints that the real target is the US shale oil producers as any production cuts by them helps US producers extra space in the market. OPEC led by Saudi Arabia wants production cuts to be expanded in an oversupplied market to prevent further erosion in oil prices that is also facing huge demand squeeze aggravated by the spread of coronavirus.

 

The failure of talks has also resulted in a crash of stock markets across the Gulf. Saudi Arabia's stock exchange, the Tadawul, was down 7.7 per cent in afternoon trading on Sunday. The Abu Dhabi index fell 5.8 per cent, Dubai's Financial Market General Index was down 7.47 per cent. Shares of Saudi state oil giant Aramco traded below their original IPO price for the first time on Sunday, at 30.90 riyals ($8.24) in Riyadh compared to the listing price of 32 riyals in December. That's down 6.36 per cent on the day.