How will the oil war of Russia and Saudi Arabia end?

US, WASHINGTON (ORDO NEWS) — A Month ago, against the backdrop of a general panic due to the coronavirus pandemic, the global oil market lost ground under its feet. The price war between Russia and the Organization of Petroleum Exporting Countries, led by Saudi Arabia, has led to a drop in oil prices below $ 30 per barrel.

At some US gas stations, gasoline began to be sold for less than $ 1.90. Now the US government is attempting to return the profits to the oil industry.

Negotiations began against the backdrop of another fall in the market: WTI oil futures fell to $ 26.08, or 7.97%. Brent crude oil – an international standard – was fixed at around $ 33.05 per barrel.

Last week, U.S. President Donald Trump said he had a telephone conversation with Saudi Arabian Crown Prince Mohammed bin Salman, and that the government had spoken out its position to Russian President Vladimir Putin. “Just talked with his friend Mohammed bin Salman, the crown prince of Saudi Arabia, who spoke with Russian President Putin. I expect and hope that they will reduce [production] by about 10 million barrels, and maybe more. If this happens, it will be great for the oil and gas industry! ” Trump tweeted.

Initially, Saudi Arabia expected a reduction of 15 million barrels per day, but Russia, obviously, is not ready to step over the mark of 10 million barrels per day. 10 million barrels is about 10% of global oil production, and this is much more than the reduction of 1.5 million barrels that Russia abandoned in early March. It is expected that a meeting between representatives of the governments of the two countries will take place on Thursday, but most observers believe that it will not be productive.

American oil producers still cannot understand how they should respond to this price war and how actively they need to take part in the process of resolving this conflict. Since people have to stay at home and maintain social distance due to the coronavirus pandemic, they have virtually stopped traveling and flying. Global transportation, which requires oil, has almost completely stopped. This led to a sharp drop in demand amid the oversupply of the oil market.

On Friday, April 3, the leaders of American oil companies met with President Trump, but they still failed to develop an action plan. Obviously, Trump decided to give American oil companies the opportunity to look for their own ways out of this situation. “These are great companies and they will find a way out,” the president said during a press conference. “This is a free market, and they will find a way out.” However, Trump also added that one of the possible tools of influence could be the introduction of duties.

Fees will be imposed only if Saudi Arabia and Russia are not able to restrain oil production growth, and if the US government decides that the only way out is to impose restrictions on oil imports. As a result, the oil and gas market will be fueled only by domestic sources, which will lead to a sharp increase in prices. This will result in huge profits for the oil and gas industry and related states such as Texas and Pennsylvania, but it will be a serious blow to consumers in other states.


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