The dual shocks of a devastating price war and the demand slump sent oil prices into a free fall to an 18-year low last month. The US crude benchmark, West Texas Intermediate (WTI) lost a stunning 70% of its value since the recent peak of $65.65 in early January and nosedived to levels below the $20/per barrel mark for the first time since February 2002. The oil market was already wobbly on heightened fears over a collapse in the global demand as governments around the world accelerated lockdowns to counter the coronavirus pandemic.

The weaker sentiment deteriorated further after major oil producers failed to reach a deal on additional supply curbs of 1.5 million barrels a day. The Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, also did not sign off an extension of an existing production agreement that expired at the end of March. In addition to this, the two oil titans – Saudi Arabia and Russia – decided to dramatically increase supply, flooding the already oversupplied market with cheap crude in the race to gain market share.

The market was trying to search a bottom amid a deepening global supply glut. The much-needed respite came from the U.S. President Donald Trump’s push for a global oil alliance to rescue the industry from the worst shock in history. Investors, in a frenzied way, started pricing in the possibility that Saudi Arabia, Russia and possibly even the U.S. — the world’s three biggest producers — could strike a once-unthinkable grand bargain to cut daily world output by 10 million to 15 million barrels. Oil prices notched a record gain of around 33% last week, albeit a fresh diplomatic rift between Saudi Arabia and Russia should keep a lid on the latest optimism.

An emergency meeting of OPEC and other major producers to discuss oil output cuts was delayed until April 9 as the two big producers traded barbs over who is to blame for the collapse in crude prices. Russian President Vladimir Putin said that the main reason behind the plunge in oil prices was the withdrawal of Saudi Arabia from the OPEC+ deal, which along with the increase in their production and agreements for discounts exacerbated the blow from the coronavirus. Saudi Arabia lashed back and issued a statement saying that Putin’s comments were devoid of truth. Against the backdrop, there is a real possibility that the talks might fail again without any agreement.