Saudi Arabia is interested in reducing oil production
US, WASHINGTON (ORDO NEWS) — After a telephone conversation between the Crown Prince of Saudi Arabia, Mohammed Ibn Salman, and US President Donald Trump, oil prices rose immediately by 30%, and the loss for the month was compensated in a few minutes.
A few days ago, the parties discussed possible ways to reduce the daily oil production and oil quotas of oil states, the total amount of which is at least 10 million barrels.
This will ensure the stability of markets and prevent a decline in oil prices. As for the Russians, they welcomed this idea. Saudi Arabia encouraged them to meet with OPEC members and independent manufacturing countries. For security reasons, the meeting is scheduled for Monday and will be held online.
The price war between the kingdom and Russia was initiated by the latter’s refusal to support the Saudi initiative to lower prices and withdraw from the OPEC + agreement. This was followed by the American proposal for mediation and statements by the President and Minister of Energy of Russia.
The latter accused Riyadh of manipulating prices in order to strike at American shale oil production and said that it was the Saudi side that refused the agreement, and not Moscow. These allegations have been refuted by evidence. It is noteworthy that Qatar decided to intervene in the crisis, confirming the falsity of Russian statements about the purpose of the Saudi oil war. I must say that Qatar is not a member of OPEC or a party to the mentioned oil agreement.
Shale oil is important to the Trump administration, and Pennsylvania is one of the US states most significant for future presidential elections. She brings 20 electoral votes and voted for Trump in the 2016 election. Shale oil production is one of the main sources of income in this state, and more than 32 thousand local residents work in this sector. As a result, Pennsylvania has been hit hard by lower oil prices, and perhaps an increase in the number of unemployed could be cited as a problem.
America is worried. On the one hand, we see that it is trying to attract Saudi Arabia to create an independent alliance outside OPEC, and on the other, it threatens to impose duties on imports of Saudi oil, which is difficult to understand, since the United States is not a market for Saudi oil. Its real customers are Europe and Asia, and what goes to America is just over half a million barrels per day. Most of the oil goes to the Motiva refinery in Texas and is owned by Saudi Aramco.
Saudi Arabia is interested in the stability of oil markets, provided that all other oil states, including the United States, Canada and Brazil, are interested in this. There is no doubt that global oil demand must be maintained.
According to some experts, it will decrease by 25% compared to 2019, as the transport and aviation sectors, which are one of the largest oil consumers in the world, are going through difficult times due to the coronavirus pandemic and its consequences. In my opinion, reducing oil production by 10 million barrels primarily serves the interests of Saudi Arabia and will give it more than the agreement rejected by Russia.
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