Will the US be able to end Saudi Arabia oil war?

US, WASHINGTON (ORDO NEWS) — US Secretary of State Michael Pompeo puts pressure on Saudi Arabia, forcing the Middle East country, which launched a price war, to “be on top” and stabilize oil markets, the State Department said.

Pompeo spoke with the crown prince of Saudi Arabia, Mohammed bin Salman, before the start of the G20 conference, urging to influence with words, at a time when oil prices are especially vulnerable. And not only because of the price war, but also because of the reduced demand due to the coronavirus.

But the words in this case seem ridiculous, given that low oil prices are exactly what Saudi Arabia intended to achieve.

For many years, Saudi Arabia carried out the bulk of production cuts agreed by OPEC to maintain high oil prices, which cost its own finances dearly. Other OPEC countries, such as Iraq, have done almost nothing to support OPEC’s strategy, and Saudi Arabia has had to tighten cuts. Russia also failed to fulfill its part of the reduction in production.

When the OPEC + agreement broke up a couple of weeks ago, Russia did not want to expand the cuts, as if it was she who took the brunt of the cuts in production, although in fact she had overproduction almost every month during the deal. And she refused to cut, with good reason.

Firstly, Russian oil fields cannot be turned on and off as easily as others, such as the US shale fields.

Secondly, the reduction in production, which is carried out to manipulate prices, only works if the world’s largest producer, the United States, plays up. But this is not so. Russia continues to reduce production, enabling US shale oil companies to take an even larger market share.

Failure was the last straw for Saudi Arabia. She responded with threats to increase production from April 1, when the current OPEC production agreement will be terminated.

Saudi Arabia hopes that low oil prices will return Russia to the negotiating table. Russia hopes that Saudi Arabia does not have the strength and resources to keep prices at $ 20-plus per barrel.

Now this is exactly the situation that Saudi Arabia hoped for: to hurt other oil producers in order to achieve changes in actions.

However, Saudi Arabia did not expect such a rapid collapse in prices, which is facilitated by the devastating consequences of the global pandemic COVID-19.

And now Ben Salman has no special reason to eliminate the damage that he intentionally caused to the oil markets.


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The article is written and prepared by our foreign editors from different countries around the world – material edited and published by Ordo News staff in our US newsroom press.