• by Thom Forbes  @tforbes, March 9, 2020

With coronavirus fears intensifying in the United States, stocks around the world took a tumble this morning in the wake of a high-stakes poker game between Russia and Saudi Arabia over oil production.

“U.S. futures pointed to heavy losses on Wall Street on Monday. Overseas, London’s FTSE 100 fell more than 8% initially to its lowest in three years; Japan’s Nikkei index slumped more than 5% and Australia’s benchmark shed more than 7%. Oil prices suffered the sharpest plunge since the 1991 Gulf War, while 10-year U.S. bond yields dropped to a record low as investors sought safety,” Adam Taylor and Teo Armus report for The Washington Post.

“Investors were jolted by Saudi Arabia’s decision to flood the market with cheap oil and cut prices -- a risky move for producers -- after Russia and other producers resisted calls to slash output in response to weakening demand caused by the coronavirus epidemic,” they add.

“Pure retaliation -- that’s the best way to describe Saudi Arabia’s response to the latest OPEC meeting. Russia, a non-OPEC member, refused to agree to OPEC’s demands to cut 1.5 million barrels of oil production a day, and that in turn led Saudi Arabian state oil giant Aramco to announce it would open the spigots and cut its oil prices by upwards of $6 a barrel. That’s what caused crude oil prices to fall some 32% Sunday night to about $28 a barrel, levels not seen since the bottom of the last crash in February 2016,” writes Lewis Braham for Barron’s.

“‘The perils of playing a game of brinksmanship with Vladimir Putin were proven in dramatic fashion,’ Helima Croft, head of global commodity strategy at RBC Capital Markets, wrote in a Friday note to clients. ‘It is hard to see how the relationship can easily be put back on a solid footing,’” Matt Egan writes for CNN Business.

“The disintegration of the grouping called OPEC+ --  made up of OPEC plus other producers including Russia  --  ends more than three years of cooperation on supporting the market, most recently to stabilize prices under threat from the economic impact of the coronavirus outbreak,” writes  Aaron Sheldrick for Reuters.

“Saudi Arabia plans to boost its crude output above 10 million barrels per day (bpd) in April after the current deal to curb production expires at the end of March, two sources told Reuters on Sunday. The world’s biggest oil exporter is attempting to punish Russia, the world’s second-largest producer, for not supporting the production cuts proposed last week,” Sheldrick continues.

“An ‘oil price war unequivocally started this weekend’ said Damien Courvalin, head of energy research at Goldman Sachs, noting the price cuts were Saudi Arabia’s biggest according to some measures in at least 20 years,” writes  David Hodari for The Wall Street Journal.

With millions of people around the world quarantined by the virus and multiple central banks deploying emergency rate cuts to try to support the global economy, oil has in recent weeks suffered a demand shock,” Hodari continues.

“That hit to oil demand, coupled with an expected increase in supply, is dealing a ‘double whammy’ to oil markets, said Matt Smith, director of commodity research at ClipperData,” writes  CNBC’s Yen Nee Lee.

“Going forward, it doesn’t seem as if we’re going to get much better news unless this (price fall) actually draws Russia back or it gets Saudi back to … the negotiating table,” he told CNBC’s ‘Squawk Box Asia’ on Monday,” Lee adds.

“Even before the weekend’s developments, stocks in the United States had fallen by more than 10% over the past month, as measured by the S&P 500 stock index. The problem globally is growing worse,” The New York Times points out in its “Markets Today” report.

“On Sunday, Italy took the dramatic step of locking down a large chunk of its industrial northern region. In the United States, a top government disease expert warned that regional lockdowns there might become necessary, though he played down the idea of tight quarantines like the kind China has enacted. Bruno Le Maire, the French finance minister, on Monday  called for a big economic stimulus plan for Europe to counter the impact of the outbreak,” the Times adds.

“Meanwhile, cases of the new coronavirus worldwide now total 109,343, according to the latest World Health Organization figures, with 3,809 deaths. In Italy, deaths from the outbreak spiked from 233 to 366 over the weekend, an increase of 57%, while confirmed cases jumped 25% to 7,375. Inclines in confirmed cases have also emerged in the U.K. and France,” CNBC’s Elliot Smith reports.

But not all routines have been disrupted. President Donald Trump yesterday got his usual round of golf in along with current and former Washington Nationals ballplayers at his West Palm Beach golf club, Brent Samuels reports  for The Hill.