With WTI crude seeing its third-worst trading day on record, Russia is beginning to feel the squeeze as it sees its oil and gas income tumble while it has to fight for its market share in key markets such as Europe and Asia.
On Wednesday, Russian President Putin’s Press Secretary Dmitry Peskov stated that Russia would sure like to see oil prices improve, but that his country has not yet reached out to OPEC to discuss measures.
Bloomberg quoted Peskov as saying that “Of course it’s a low price, we would like to see it higher,” adding “We’re very closely monitoring the situation on global oil markets, analyzing the situation, trying to make forecasts for the near- and mid-term future,”
Moscow’s decision to not deepen output cuts triggered an unexpected response in Riyadh, which decided to leave behind the OPEC deal and start pumping flat out.
Saudi Arabia’s latest claim of supplying markets with 12.3 million bpd during the next couple of months has triggered a further collapse in oil prices on Wednesday afternoon, with WTI collapsing 25% as the Dow Jones Index shed more than 20,000 points, effectively erasing all gains since U.S. President Trump got sworn in.
Next to Russia, OPEC’s no.2 producer Iraq urged the cartel to come together and find a solution to stop the bloodbath in oil markets. According to Oilprice.com’s Irina Slav, ‘’Iraqi Oil Minister, Thamer al-Ghadhban, has asked OPEC’s head, Mohammed Barkindo to call an extraordinary meeting of OPEC+ to ‘discuss all possible ways’ to reverse the oil price slide’’.
At this moment, it seems unlikely that Saudi Arabia and the UAE will change course and listen to pleas from Iraq, Venezuela, Mexico and even U.S. senators. The oil war is unlikely to end soon, and as I mentioned yesterday, national prestige, honor and political power are driving this geopolitical game of thrones in which no party wants to hand an easy victory to the other.
Russia and all the other producers are prepared to face a lot more pain before taking a seat at the negotiating table again.
By Tom Kool for Oilprice.com
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