Saudis trying to prop up oil as prices slump over recession fears
Saudi Arabia is reaching out to other oil producers to discuss possible responses as oil prices plunged to a seven-month low, according to a Bloomberg report.
Citing a Saudi official, Bloomberg reported that the kingdom “won’t tolerate” falling oil prices. It’s unclear what measures, exactly, Saudi Arabia plans to take.
Alongside other members of the Organization of Petroleum Exporting Countries (OPEC), Saudi Arabia, the world’s largest oil exporter, agreed to cut production in hopes of ending an emerging supply glut. Non-OPEC members, including Russia, reduced output.
Oil prices dropped on Wednesday, swept up in fears of a global economic recession after trade relations between the U.S. and China worsened amid concerns about the possibility of a currency war. The tension melted over globally, prompting central banks in India, Thailand and New Zealand -- in rapid succession -- to cut interest rates more deeply than expected.
In the first week of August, crude oil plunged by more than 13 percent -- and is down more than 20 percent since its April peak. It’s now bordering on bear-market territory.
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Oil investors are also worried about slowing demand after the latest round of U.S. tariffs -- 10 percent on $300 billion of goods -- on China. In a note to investors, Bank of America Merrill Lynch estimated the latest rounds could decelerate oil demand by about 250,000 to 500,000 barrels per day.
“Oil is at the edge of a cliff,” the analysts wrote.