Oil prices tumbled Wednesday after Saudi Arabia and Gulf partner UAE stepped up a price war with plans to flood the global markets while a rally in equities evaporated as investors nervously await a US coronavirus relief plan.
Crude dived after UAE, the fourth OPEC producer, joined number one Saudi Arabia in plans to hike supplies and raise their oil production capacity by millions of barrels a day in response to Russia's refusal to agree output cuts to support prices.
A day after the kingdom said it would boost supplies by at least 2.5 million barrels per day to 12.3 million bpd in April, Riyadh said it will further boost capacity to 13 million bpd.
UAE national oil company ADNOC said it was ready to raise output by one million bpd to 4.0 million bpd and increase capacity to 5.0 million bpd.
Markets had been showing signs of much-needed stability in early trade following two days of wild gyrations, thanks to a pledge by US President Donald Trump to unveil measures to counter the effects of the disease on the world's biggest economy.
Crude had provided support, rising for a second day after Monday's massive meltdown.
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But jittery investors slowly sold out as Wednesday wore on and then slumped deep into the red.
Both main crude contracts fell more than three percent, having been up as much as five percent earlier in the day.
The price war follows Russia's rejection last week of a Saudi-led proposal to deepen production cuts to support oil prices as demand falls due to the economic disruption caused by the coronavirus outbreak.
Production cuts by Saudi-led OPEC and an alliance of producer nations including Russia has helped prop up oil prices the past couple years in the face of rising production by the United States.
Wednesday's U-turn on oil markets spurred a similar move in equities markets.
Asian stock markets had been well in positive territory in morning trading but finished lower.
London stocks were marginally lower after the Bank of England slashed its key interest rate to a record low 0.25 percent and the government pledged fiscal stimulus worth ?30 billion ($39 billion, 34.4 billion euros).
Paris and Frankfurt kept in positive territory, while Milan was down 0.6 percent despite the Italian government promising even more stimulus.
US markets opened sharply lower, with the Dow dropping 3.0 percent in the first minute of trading.
"This negative bias has been facilitated by reports that there is indecision in Washington still about the fiscal stimulus that should be enacted to deal with the fallout from the coronavirus," said market analyst Patrick J. O'Hare at Briefing.com "The president would like the payroll tax to be suspended but reportedly there is bipartisan disagreement over that idea. Instead, lawmakers are said to be interested in more targeted economic measures," he added.
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