Saudi Arabia has decided to abandon the attempts in favor of crude prices and is going to deliver a massive amount of cheap oil in the global market. That would be a great disaster for rival producers, including the United States and Russia.
A week ago, crude oil’s biggest producer moved to OPEC headquarters in Vienna to meet with other producers, including Russia, to reduce a significant drop in demand, due to coronavirus outbreak. Moreover, the meetup wasn’t proved much fruitful and turning both producers (Russia and Saudi Arabia) into a production battle where price doesn’t matter. Both rivals want to defeat adversary player by fetching more market shares.
Last December, Prince Abdul-Aziz bin Salman, the energy minister of Saudi Arabia, the eldest boy of King Salman, who cajoled OPEC’s minister and related crude exporters to increase cuts to 1.7 million barrels per day. In February, the country hit another 400,000 b/d cut in its production. It even looked for a more cut of 1.5 million barrels to neutralize the drastic impact on oil prices amid coronavirus.
One of the OPEC’s official told media in Vienna’s meeting that Abdul-Aziz bin Salman even supported to enlarge cuts for 2020 and coordinate with all OPEC members without making contact with Russian equivalent member, Alexander Novak. Collecting all the guidance from President Vladimir Putin, Alexander Novak went out on Saudi initiative.
After the conference, Novak said to reporters that exporters would be freehand on 1st April, in order to build their own rules for their production. He added there would be no longer restrictions to manage the market.
Saudi Arabia was leading the oil production community from the last three years, and the main entity that supported crude oil cuts and prices. Since Russia denied to budget, Saudi territory has reversed the plan and acted as a dominant rival with an aggressive attitude.
Kingdom’s biggest move is to immensely grow its production on 1st April by 2.6 million b/d. The energy market severely fluctuated by this move and would face the biggest fall since 1991.
United States energy organizations are equivalently facing the severe effects of crossfire because prices are low 50 percent from their January highest and at the lowest stage since early 2016. American Energy Information Administration described that U.S. oil output would increase by a small amount than expected rise of 760,000 b/d in this year. And expectedly it would reduce by more than 3000,000 b/d in the coming year.
Nowadays, America grasps the title of the world’s biggest oil producer. Upcoming April would bring the second position for Saudi Arabia, and Russia is consistently dropping down with a limited capacity. Peoples even think that price war wouldn’t end until Saudi Arabia gets production crown of the world.