Such events are characterised by their extreme rarity and severe impact. The term was popularised by the 2007 book, The Black Swan: The Impact of the Highly Improbable, by former options trader Nassim Nicholas Taleb.
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The fall came as Saudi Arabia on March 8 tore up the agreement it had made with Russia in September 2016 to cooperate in managing the price of oil. This agreement, due to be renegotiated in April, created an informal alliance between the Saudi-led oil cartel Opec and non-Opec producers. As of January, this Opec+ alliance had reduced oil production by 2.1 million barrels per day.
Riyadh and Moscow had fallen out over the best strategy with which to respond to the huge fall in demand created by the spread of the coronavirus, as airlines were grounded and millions stopped using their cars to go to work.
The Saudis had demanded that Russia agree to a sharp price cut. Perhaps still remembering how external pressure engineered the 1980s oil price plunge that crippled the Soviet economy, Moscow said “nyet ” and a price war ensued, with the Saudis cutting prices and flooding the market with their surplus oil.
The price collapse has hit the United States, which now ranks among the world’s leading oil exporters.
As a result of the coronavirus crisis, stock prices have plummeted for all US oil firms, not just those involved in the
The latest reports are that, as a result, the Trump administration is applying diplomatic pressure on Riyadh to cut its oil production. It is also threatening to increase sanctions against Russia with a view to stabilising prices, according to The Wall Street Journal.
In addition, Texas regulators are considering whether the US itself should curtail crude oil production for the first time in decades.
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