Wall St tumbles by most since GFC as economic fears escalate

Wall St tumbles by most since GFC as economic fears escalate

Investors and analysts say a “worst-case scenario” may be unfolding for oil markets, threatening the viability of a multibillion-dollar pipeline of new projects and complicating planned mergers and acquisitions in the sector.

The value of Australia’s energy sector plummeted $17 billion on Monday as the global oil price suffered its sharpest single-day drop since the Gulf War of the early 1990s. On Monday, oil prices fell by as much as 30 per cent after Saudi Arabia started a price war with Russia by cutting its selling prices and pledging to bring greater oil supply into a market already suffering from falling demand due to the coronavirus outbreak.

In its biggest-ever intraday decline, Australia’s energy sector lost an alarming 20 per cent of its total value on Monday as ASX-listed oil and gas producers took a battering. Oil Search shares shed 35 per cent, Santos lost 26 per cent, Woodside 18 per cent and Caltex 15 per cent.

Global fund manager Fidelity International said the prospect of a full-blown oil price war alongside a deepening global outbreak of the coronavirus epidemic caused global markets to “gyrate”.

“How low can oil go?” Fidelity portfolio manager James Trafford said. “A number of factors will weigh heavily on medium-term prices, including whether a political solution can be attained to resolve the apparent OPEC+ standoff and how quickly the virus-hit areas return to normal levels of demand.”

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