Saudi, Russia Brace for Long Price War

摘要

Oil has a new world order following the “no deal” collapse of last week’s Opec-plus meeting, and it’s all about market share. A price war is under way and both Saudi Arabia and Russia, the linch- pins of the Opec-plus alliance that has managed oil markets since 2017, are preparing for sustained battle. Moscow’s refusal to back additional production cuts to help offset demand loss from the coronavirus spurred a “shock and awe” supply response from Riyadh, which is moving rapidly to flood an already-oversupplied market in a bid to boost market share and, PIW understands, give Russia a taste of what an unregulated market looks like. Brent has crashed into the mid-$30s and the breakdown in oil markets has intensified fears of a global recession. Opec-plus talks collapsed on Mar. 6 amid disagreement by the Saudis and Russians about what the market needs to offset demand losses and support prices. Saudi Arabia thought Moscow would back additional cuts of 1.5 million bar- rels per day until the end of 2020, while Russia felt “blackmailed” by the proposal, according to a mem- ber of the Russian delegation, and merely envisioned an extension of the current 2.1 million b/d cut deal to Jun. 30 from Mar. 31 (PIW Mar.6’20).