Oil prices plunged more than 10% to multi-year lows on Friday as OPEC's allies rejected additional production cuts that the organization proposed Thursday.
U.S. West Texas Intermediate crude slid 10.07%, or $4.62, to settle at $41.28, its lowest level since Aug. 2016. It was WTI's worst day since Nov. 28, 2014. Earlier in the session WTI traded as low as $41.11 per barrel.
International benchmark Brent crude slid 9.4% to settle at $45.27 per barrel. Its session low was $45.18, which is a price not seen since June 2017.
The meeting between OPEC and its allies, known as OPEC+, concluded with no deal on additional production cuts. The cartel and its allies agreed to meet again to monitor the situation. The current production cuts will be in place until the end of March as planned, but it's uncertain if they will extend beyond this month.
Russian Energy Minister Alexander Novak told reporters leaving the meetings in Vienna on Friday that it meant that members could now pump what they liked starting April 1.
"We have made this decision because no consensus has been found of how all the 24 countries should simultaneously react to the current situation. So as from April 1, we are starting to work without minding the quotas or reductions which were in place earlier but this does not mean that each country would not monitor and analyse market developments," he said.
On Thursday, OPEC recommended additional production cuts of 1.5 million barrels per day from the beginning of next month until the end of the year.
The proposal was conditional on support from non-OPEC producers, including Russia. OPEC cautioned that the deal could only be applied on a pro-rata basis with core members set to cut 1 million barrels per day and non-OPEC partners expected to cut 500,000 barrels per day.
Oil has tumbled into bear market territory as the coronavirus outbreak has led to softer demand, and many on the Street expected OPEC to step in in a bid to prop up prices.
"The OPEC+ confab is devolving into the worst case scenario for the group. Last night, the best case scenario for the group was touted: a cut of 1.5 million bpd through year-end. That scheme hinged on Russian participation, however, which is not forthcoming," Again Capital's John Kilduff said.
Kilduff believes that without the additional cut of at least 1 million barrels per day WTI prices could head into the upper $30s.
The XLE, which tracks the energy sector, slid more than 4% on Friday, and is down 21% in the last month. The XOP, another oil and gas ETF, fell more than 7% to hit its lowest level on record, going back to its inception in 2006.
Virtu Financial founder Vincent Viola said he believes oil will test the $35 level again, which not adjusting for inflation is more like $28 to $32. This, in turn, will pressure many American producers.
"The exploration and production patch is going to go through a dislocation and you're going to see a lot of bankruptcies and replacement and quite frankly restructuring of the domestic oil market," he said Friday on CNBC's "Halftime Report."
The last time OPEC+ reduced supply on such a scale was in 2008 when it took 4.2 million barrels per day off the market to support oil prices in the wake of the financial crisis.
The oil producers first committed to curtailing their collective production policy back in 2016 in an effort to bolster prices, with the deal coming into force in January 2017.
In December 2019, it was extended and the alliance agreed to curb oil output by approximately 1.7 million barrels per day. Saudi Arabia then opted to cut its own production voluntarily by an additional 400,000 b/d for three months, should fellow members stick to their commitments. This brings the overall cut to 2.1 million barrels per day.
- CNBC's Michael Bloom contributed reporting.