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The Great Oil Crash of 2018

Matt Egan, CNN Business

The meltdown in the oil market has caught almost everyone off guard.

In the span of mere weeks, crude prices went from a four-year high to a full-blown bear market. The oil crash — crude is down more than 30% from its recent peak — was triggered by a series of factors that combined to spook traders who once saw $100 oil on the horizon.

“The sheer scale of the move is triggering unpleasant memories of 2014 and 2015,” said Michael Tran, director of global energy strategy at RBC Capital Markets, alluding to the last oil downturn.

US oil prices plummeted another 7% on Friday, breaking below $51 a barrel for the first time in 13 months.

President Donald Trump celebrated the oil crash.

“Oil prices getting lower, Great! Like a big Tax Cut for America and the World. Enjoy!” Trump tweeted on Wednesday. “Thank you to Saudi Arabia, but let’s go lower!”

Iran headfake

Saudi Arabia deserves some of the “credit” — but certainly not all of it.

Earlier this year, the Trump administration vowed to zero out Iranian oil exports. That tough stance on Iran sanctions lifted prices dramatically.

Under pressure from Trump, Saudi Arabia ramped up production to an all-time high.

That’s critical because Saudi Arabia is like the central bank of oil. It’s the world’s largest exporter and the only country with the ability to significantly ramp up output. Russia and the United States also accelerated production.

But the Trump administration shocked the oil market earlier this month by taking a softer approach on Iran. Temporary waivers were granted, allowing India, China and other countries to keep buying crude from Iran.

The Iran headfake left the oil market suddenly facing a potential supply glut. OPEC is now under pressure to significantly cut output at next month’s meeting in Vienna to help put a floor beneath the market.