The Russian ruble fell to a four-year low after oil prices collapsed following a breakup of talks between OPEC leader Saudi Arabia and erstwhile partner Russia.
The ruble tumbled early on March 9 by 5 percent to 72.72 against the U.S. dollar, the worst rate since early 2016.
Meanwhile, gold prices crashed 20 percent in opening trading on March 9 as concerns of an oversupply in the market resurfaced after the so-called OPEC+ grouping, which includes Russia and Kazakhstan, failed to reach an agreement in Vienna last week on extending output cuts to bolster prices.
Stock markets were also in a freefall early on March 9, with Tokyo’s main index down more than 5 percent in early trading and other Asian markets following suit.
OPEC has pushed to cut production amid an expected decline in demand as the coronavirus epidemic threatens to wreak havoc upon the world economy. The Kremlin has resisted extending cuts to the amount and length of time sought by the cartel.
Following the dispute with Russia, Saudi Arabia launched the start of a price war, cutting prices its price by $4-$6 a barrel to Asia and $7 to the United States. The price of benchmark Brent crude was trading at $36 a barrel, while the traditionally lower priced U.S. benchmark was at $32 a barrel.
In a 2014 price war, oil prices crashed to below $30 a barrel.
Jeffrey Halley, a market analyst at OANDA, told AFP that “Saudi Arabia seems intent on punishing Russia.”
“Oil prices…will likely be capped over the next few months as coronavirus stalls economic growth, and Saudi Arabia opens the pumps and offers huge discounts on its crude grades.”
Masayuki Kichikawa of Sumitomo Mitusi Asset Management in Tokyo told Reuters that “I don’t think the end goal of the Saudis is to collapse the oil market. This is more likely a tactic to get Russia back to the negotiating table.”
“I am sure that behind the scenes, the United States and Saudi Arabia are trying to get Russia to return to negotiate. The problem is we do not know how long this will last, so investors have no choice but to sell risk.”