Oil prices were plunging by nearly 25 percent late Sunday, triggering broader global market losses, as a dispute among producers could lead an economy already weakened by coronavirus facing a major oversupply of crude.
Brent crude, the international standard, lost $11.17, or 24.7 percent, to $34.10 per barrel, as of 10:15 p.m. Eastern time Sunday after earlier touching its lowest price since 2016.
The dramatic losses followed a 10.1 percent drop for U.S. oil on Friday, its biggest loss in over five years. Prices are falling as oil-producing countries argue how much to cut production to prop up prices, as The Wall Street Journal reported, specifically pointing to Saudi Arabia, which slashed prices for its benchmark crude after talks with Russia collapsed.
Stock index futures opened sharply lower on a plunge in oil prices and rising coronavirus worries after Italy ordered a lockdown across most of its north, including financial capital Milan, in a bid to halt its spread.
Saudi Arabia also reportedly planned to boost its oil production by well over 10 million barrels per day. West Texas intermediate crude was plunging more than 22 percent, the biggest loss since the launch of Desert Storm in 1991, to the lowest levels since February 2016. Safe-haven gold surged above 1,700 per troy ounce for the first time in seven years.
Demand for energy was falling as people cut back on travel around the world. The worry has been that the outbreak globally will slow economies sharply, meaning even less demand.
Russia on Friday refused to join the Organization of the Petroleum Exporting Countries [OPEC] in a large production cut. However, its disruption from a three-year alliance with Saudi Arabia may be temporary.
AxiCorp chief market strategist Stephen Innes called reports that Saudi Arabia could increase its oil production to gain market share a "shock-and-awe" strategy.
The oil market has seen arguments like this before. In 2014, OPEC held off production cuts in order to hold onto market share in the face of a resurgent U.S. oil industry. That led to oil to tumble from over $100 a barrel to below $40 by 2015.
This most recent plummet for oil adds another punch to what's already been a brutal and dizzying couple weeks for financial markets worldwide. The U.S. stock market is down 12.2 percent since setting its record last month on worries about how much corporate profits will fall because of COVID-19. It's set on Monday to mark the 11th anniversary of hitting bottom after the 2008 financial crisis.
Treasury yields have plummeted to record lows as investors pile into anything that looks safe, almost regardless of how little it pays. The 10-year Treasury yield pierced below 1 percent for the first time on Tuesday, only to breach 0.70 percent Friday.
The virus usually leaves people with only mild to moderate symptoms, but because it's new, experts can't say for sure how far it will ultimately spread and how much damage it will do, both to health and to the economy. The number of cases has reached 109,000 globally.
If the number of new infections slows in other parts of the world as it has in China, if the U.S. jobs market remains as solid as it's been and if all the unease in markets ends up creating just a short-term dip in confidence among shoppers, all this may recede quickly. But those are a lot of potential pain points.
"There are more if's than at any other time in this 11-year bull market," say strategists at BTIG.
The Associated Press contributed to this report.