On March 18, the world oil market suffered another panic plunge, with the price of brent crude in London dropping 13% to close at $24.72 a barrel and the price of light crude in New York dropping 23% to close at $20.48, the lowest since 2003. At present, the outbreak of new pneumonia in more than 100 countries and regions, especially in east Asia and major economies in Europe and the United States has become the major disaster areas, social and economic life has suffered an unprecedented impact, leading to the collapse of investor confidence, the market is especially like a bird of fear. With so many sudden risks piling up, one wonders where the bottom lies on the world oil market.

Historically, every time there has been an oil shock, the trigger has been a geopolitical conflict, oil has been used as a weapon, but ultimately it is supply and demand that determines the price, either supply is tight or demand is insufficient. This is the only time supply and demand are both big problems.

According to Goldman sachs, world oil demand will fall by an average of 1.1m b/d this year. If the outbreak spreads, demand could fall further, peaking at 8m b/d by the end of march. Meanwhile, the world is forecast to have an oversupply of 3.9m b/d in the first and 5.7m b/d in the second quarter of this year as producers ramp up production at full capacity as Saudi Arabia and Russia cut each other off. Meanwhile, global oil reserves, including the U.S. strategic reserve, total 1.1 billion barrels. It can be seen that the severe oversupply in the world oil market is difficult to reverse in the short term. As a result, there is no shortage of bearish forecasts that oil prices could continue to fall below $10 a barrel. If so, many of the world's oil consumers will laugh their heads off. Still, major energy consultants are sticking to conservative estimates that world oil prices will recover to between $30 and $40 a barrel in the second half of the year.

Now, as the international community joins forces to fight the new coronavirus, will Saudi Arabia and Russia, warring parties in the price war, bury the hatchet? The news comes as Russia admits that it prefers an era of high oil prices and that this year's fiscal deficit may be inevitable, after a projected $11.4 billion surplus in oil revenues. Meanwhile, the Russian ruble has lost 30% of its value this year as oil revenues have plunged. Russian energy minister novak said earlier that the door to cooperation with Opec was not closed. That suggests Russia is likely to return to the negotiating table. But a price war with Saudi Arabia is a matter of Russian shipping.

Saudi Arabia remains defiant, reiterating that it will continue to increase production to 12.3m b/d in the coming months and that exports have reached an all-time high of 10m b/d. Market analysts believe Saudi Arabia's relentless price war is undermining its long-standing reputation as an oil price stabiliser. If Russia is not brought back to the negotiating table soon, Saudi crown prince salman will face regime challenges at home and pressure to run out of money, as well as doubts abroad, especially from the United States. Republican senators in the United States have called on Saudi Arabia to reassess its policy on expanding oil production, as the low-oil strategy has hit the U.S. shale oil industry hard, and major U.S. energy-producing states like Texas and north Carolina have run into trouble.

The us shale oil industry is by far the biggest loser from the price war, with many oil companies closing mines that were drilled just four years ago, more small and medium-sized oilmen saddled with debt and thousands of workers on oil Wells losing their jobs. But what is particularly bizarre is that Mr Trump has been able to reap unexpected political benefits. It is estimated that a $10 reduction in the price of crude oil would reduce the price of a gallon of gasoline by 25 to 30 cents, which would mean an additional $1 billion in annual savings for American households. America is a nation on wheels. Cheaper gas is a big deal in America, especially in an election year, when an incumbent President gets more support.

With the oil market prices continue to break down, it is estimated that Saudi Arabia and Russia can only follow the trend, can not hope to turn things around. At the moment, oil-producing countries are focused on one thing: fighting for international market share. Export more, make more money. Market analysts generally believe that the outbreak of the impact and impact on the international economy is still difficult to predict, the price of crude oil in the short term will remain volatile.