section_path: Causes/Russia–Saudi Arabia oil price war
section_name: Russia–Saudi Arabia oil price war
paragraph_text: Russia–Saudi Arabia oil price war
  
  The reduction in the demand for travel and the lack of factory activity due to the COVID-19 pandemic significantly impacted demand for oil, causing its price to fall. The Russian–Saudi Arabia oil price war further worsened the recession, due to it crashing the price of oil. In mid-February, the International Energy Agency forecasted that oil demand growth in 2020 would be the smallest since 2011. A slump in Chinese demand resulted in a meeting of the Organization of the Petroleum Exporting Countries (OPEC) to discuss a potential cut in production to balance the loss in demand. The cartel initially made a tentative agreement to cut oil production by 1.5 million barrels per day following a meeting in Vienna on 5 March 2020, which would bring the production levels to the lowest it has been since the Iraq War.
  
  After OPEC and Russia failed to agree on oil production cuts on 6 March and Saudi Arabia and Russia both announced increases in oil production on 7 March, oil prices fell by 25 percent. On 8 March, Saudi Arabia unexpectedly announced that it would increase production of crude oil and sell it at a discount (of $6–8 a barrel) to customers in Asia, the US, and Europe, following the breakdown of negotiations, as Russia resisted calls to cut production. The biggest discounts targeted Russian oil customers in northwestern Europe.
  
  Prior to the announcement, the price of oil had gone down by more than 30% since the start of the year, and upon Saudi Arabia's announcement, it dropped a further 30 percent, though later recovered somewhat. Brent Crude, an oil market used to price two-thirds of the world's crude oil supplies, experienced the largest drop since the 1991 Gulf War on the night of 8 March. Concurrently, the price of West Texas Intermediate, another market used as a benchmark for global oil prices, fell to its lowest level since February 2016. Energy expert Bob McNally noted, "This is the first time since 1930 and '31 that a massive negative demand shock has coincided with a supply shock;" in that case it was the Smoot–Hawley Tariff Act precipitating a collapse in international trade during the Great Depression, coinciding with discovery of the East Texas Oil Field during the Texas oil boom. Fears surrounding the Russian–Saudi Arabian oil price war caused a plunge in U.S. stocks, and have had a particular impact on American producers of shale oil.
  
  In early April 2020, Saudi Arabia and Russia both agreed to cut their oil production. Reuters reported that "If Saudi Arabia failed to rein in output, US senators called on the White House to impose sanctions on Riyadh, pull out US troops from the kingdom and impose import tariffs on Saudi oil." The price of oil briefly went negative on 20 April 2020.