Economy

How the 2020 oil crisis is set to disrupt Brazil

How the 2020 oil crisis is set to disrupt Brazil
Photo: Wawritto/Shutterstock

As GZero Media’s Alex Kliment puts it, Russia and Saudi Arabia have engaged in “a crude game of chicken.” Over the weekend, Riyadh decided to flood the market with cheap oil in retaliation for Moscow backing out of a deal by members of the Organization of the Petroleum Exporting Countries (Opec) to artificially inflate international prices, amid a cooling in demand caused by the coronavirus outbreak.

The first effect of this price war was a 2020 version of Black Monday, with markets around the world suffering their biggest losses since the 2008 financial crisis. In São Paulo and New York, stock markets triggered circuit breakers in order to stop hemorrhaging money. By the end of the day, Brazil’s benchmark stock index Ibovespa lost over 12 percent.

But is the economic outlook that terrible for everyone?

On Monday, Brent oil contracts plummeted 24 percent—their worst day since the 1991 Gulf war—closing the day at USD 34.36 per barrel. Petrobras shares’ followed the rout, dropping nearly 30 percent in one day, which was enough to erase nearly four years of gains.

Obviously, lower crude prices have an automatic impact on Petrobras’ revenues. In this regard, Levante Investimentos analysts...

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