A barrel of oil now costs less than an actual empty metal barrel after the price of oil crashed Monday.
A newly sparked trade war between Saudi Arabia and Russia paired with global uncertainty about coronavirus drove the price of a barrel down sharply as markets opened this week. The value of West Texas Intermediate oil (WTI), a common benchmark for the overall oil market, lost a quarter of its value, settling just above $30 per barrel, according to CNN Business. A used metal barrel costs around $40 from major retailers.
While this is not the first time 42 gallons of oil can be had for less than a steel barrel, it does mark a four year low for the price of crude, according to the Wall Street Journal. This dramatic price drop is also the farthest the price of oil has fallen in one day since 1991. (RELATED: Uber May Not Alert You If You’ve Ridden With Coronavirus-Infected Driver)
A barrel of oil is currently costs less than actual barrel#marketcrash pic.twitter.com/MqdxUHFmPM
— Dinesh Kada (@dinesh_kada) March 9, 2020
This plunge in prices is the result of Saudi Arabia attempting to re-capture market share from Russia after Putin rejected OPEC’s plea to reduce Russia’s oil output by 1.5 million barrels per day. With their request denied, Saudi has now begun selling its oil to Chinese customers for massive discounts and has vowed to increase overall production by 2 million barrels per day, according to CNBC.
Unfortunately for investors around the world, this decision had a profound and immediate effect on other markets and investment vehicles as well. The Dow Jones industrial average dropped 2,013.76 points, or 7.8% Monday along with the blue-chip average — which dropped 19% after hitting all-time highs less than one month ago, reported USA Today.
This severe decline in the stock market is not localized to the US and is likely related to fears of instability as coronavirus continues to spread.