Saudi-Russia War of Words Delays Oil-Truce Talks

Marco Green
April 6, 2020

Russia's disagreement with the OPEC decision to cut oil supply in early March resulted in a price war with Saudi Arabia that significantly drove down the market prices.

Oil was trading down on Monday after the delay of OPEC+ talks, with Brent sliding nearly two percent to $33 per barrel.

But Rystad Energy's head of oil markets Bjornar Tonhaugen said even if the group agree to cut up to 15 million bpd, "it will only be enough to scratch the surface of the more than 23 million bpd supply overhang predicted for April 2020".

Global crude oil prices fell sharply on Monday morning, as uncertainty loomed in the market after Saudi Arabia and Russian Federation postponed to April 9 a meeting about a potential pact to cut production, Reuters reported.

Saudi Arabia announced minutes later that it was calling an extraordinary meeting of OPEC+ members for April 6, which is now under doubt. Prices are still less than half the levels at the start of the year, with the coronavirus crisis crushing demand.

Production cuts could come "too little, too late" to support oil prices, ANZ and Citi analysts cautioned.

Oil futures both fell on Monday morning in Asia, with U.S. West Texas Intermediate crude down 3.63 percent at $27.31 and Brent crude losing 2.05 percent to trade at $33.41.

Oil pared losses amid signs that Saudi Arabia and Russian Federation are making progress toward an agreement to curb crude output as the coronavirus wreaks havoc on the global economy.

"That's a pretty clear sign that they are open to cutting production in May", he said.

The kingdom delayed the release until Friday to wait for the outcome of the meeting between Opec and its allies regarding possible output cuts, a Saudi source told Reuters.

When asked at a White House press briefing under what conditions he would impose the levies, Trump said, "If the oil price stays the way it is.I would do that, yeah, very substantial tariffs".

Meanwhile, American President Donald Trump threatened to impose "very substantial tariffs" on oil imports to the United States if the crude price stays the way it is. "We're not going to surrender our industry and we're prepared to go the distance here".

From Russia's perspective cutting production would boost U.S. oil producers at the expense of global competitors and lead to a loss in profits.

Other reports by Click Lancashire

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