Saudi Oil Industry at Risk as American, European Refiners Refusing Riyadh’s Crude

Marco Green
March 30, 2020

The U.S. Senate unanimously handed the $2 trillion invoice geared toward serving to struggling employees and industries harm by the influence of the coronavirus epidemic, and despatched the laws to the Home of Representatives.

According to WSJ, Saudi Arabia may need to cut prices even further as global benchmark Brent has fallen below even the discounted rates at which the country is looking to sell.

"Joint actions by countries are needed to restore the (global) economy..."

It has even been predicted that this oil price war could bring the price down even further to $10 per barrel.

The comment came after a senior Russian official said on Friday that a larger number of oil producers could cooperate with OPEC and Russia, in an indirect reference to the United States, the world's biggest producer which has never cut production.

Crude futures shed about 45 percent of their value this month amid the global economic slowdown associated with COVID-19, and Saudi Arabia's decision to ramp up production to up to 12.3 million barrels per day.

Just a few weeks after the OPEC+ discussions to cut crude oil productions fell apart, which triggered the collapse in crude oil prices, Russian Federation appears to have had a change of heart. Both benchmark brands, WTI and Brent, were trading lower on Friday, ending the week at $21.51 per barrel and $27.95 per barrel respectively.

With settling at below $23 per barrel on Thursday, a freight rate of around $6 or below would still be a premium of at least 25% on the flat price - not exactly what you'd want to pay in an environment where nearly all non-essential travel across the world had ground to a halt.

"There was a certain assumption that it was going to happen so you had that backstop, to a certain degree, (for WTI) that didn't exist for the worldwide benchmark", said Bob Yawger, director of futures Mizuho in NY.

Global oil demand stood at about 100 million barrels per day previous year, according to the U.S. Energy Information Administration. "That's 20% of what used to be a daily demand of 100 million barrels before the crisis".

Oil and gas research group JBC Energy said it had "drastically" reduced its oil demand forecast for 2020, expecting a decline of more than 7.4 million bpd on average.

Oil prices have slumped 60 per cent since January to below $30 a barrel.

Leaders of the U.S. House of Representatives are determined to pass a $2.2 trillion coronavirus relief bill by Saturday at the latest, hoping to provide quick help as deaths mount and the economy reels.

Other reports by Click Lancashire

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