Combined with the global shock to crude demand from the spread of COVID-19, the price war means the outlook for the oil market is “even more dire” than in November 2014, the start of a similar battle that ultimately took crude below $30 a barrel by early 2016, the analysts said.

“The oil market is now faced with two highly uncertain bearish shocks with the clear outcome of a sharp price selloff,” the analysts said.

Indeed, fears of a supply glut combined with a demand hit saw oil futures plunge more than 20% as markets reopened late Sunday. West Texas Intermediate crude for April delivery
CLJ20,
-20.90%
was down $9.12, or 22%, at $32.16. May Brent crude
BRNK20,
-21.00%,
the global benchmark, plunged $10.04, or 22.2%, to $35.23 a barrel.

The plunge in oil prices was also seen weighing on equities with U.S. stock-index futures off sharply in early trade, pointing to triple-digit losses for the Dow Jones Industrial Average
DJIA,
-0.98%
and a steep fall for the S&P 500
SPX,
-1.70%.

Read:Why oil just topped the coronavirus as the stock market’s biggest problem

A push by the Organization of the Petroleum Exporting Countries for members of the organization and its Russia-led allies to add to increase existing cuts by 1.5 million barrels a day was rejected by Moscow in talks that collapsed Friday without an agreement. Saudi Arabia over the weekend cut its export prices for crude, according to reports, in a move that was seen as aimed at undercutting Russia as oil powers engage in a battle for market share.

“We believe the OPEC and Russia oil-price war unequivocally started this weekend when Saudi Arabia aggressively cut the relative price at which it sells its crude by the most in at least 20 years,” the Goldman analysts said in a note. “This completely changes the outlook for the oil and gas markets, in our view, and brings back the playbook of the ‘New Oil Order,’ with low-cost producers increasing supply from their spare capacity to force higher cost producers to reduce output.” (See charts below:)

Oil was already under pressure before the OPEC+ alliance appeared to fall apart, with demand fears pushing both grades into bear-market territory earlier this year.

How low could they go now? Goldman said the demand shock from the spread of the coronavirus was equivalent to that seen in the first quarter of 2009 amid the financial crisis, while the production surge was likely to be much like that seen in the second quarter of 2015 amid the last price war — setting the stage for “a likely 1Q16 price outcome.”

“As a result, we are cutting our 2Q and 3Q20 Brent price forecasts to $30/bbl with possible dips in prices to operational stress levels and well-head cash costs near $20/bbl,” they wrote.

Those price levels “will start creating acute financial stress and declining production from shale as well as other high-cost producers,” Goldman warned.

Specifically, the analysts said they expect to see a “negligible” production response by shale producers in the second quarter, but then see output falling sequentially in the third quarter by 75,000 barrels a day and by 250,000 barrels a day quarter-on-quarter in the fourth quarter of 2020.

But that wouldn’t be enough, they said, to prevent a third-quarter surplus of 1.2 million barrels a day with inventories peaking above their 2016 highs as the spot price for Brent hovers around $30 a barrel, on average.

The negative feedback loop created by lower oil prices, which contribute to a slowdown in exporting countries’ economic growth, thereby weighing on oil demand, could ultimately require oil prices to fall to “operational stress levels for high cost producers with well-head cash costs near $20 a barrel,” they said.