The new oil war
The oil war of Saudi Arabia and Russia.
Saudi Arabia has unleashed the chaos strategy in the oil market to convince Russia to coordinate a production cut. Moscow last week rejected OPEC’s proposal to cut 1.5 million barrels a day to compensate for the collapse in demand for crude oil caused by the coronavirus crisis. And Riyadh tries to do the maximum possible damage to Russia by lowering prices. In the end, little has changed since 2014, when Saudi Arabia began to move to defend its world market share against competitors.
Partners for convenience. The alliance of Saudi Arabia and Russia had been established based on an enemy American oil from fracking in the US and Canada. The two largest producers in the world formed OPEC + to coordinate production and price policy to stop the expansion of the market share of American crude. But Russia, which has surpassed Saudi Arabia in oil production, has been during all this time a direct competitor of the Saudi kingdom for the throne of oil.
The coronavirus crisis has only been the spark of a war for market control that has been developing since 2014, when Saudi Arabia began to lose world share of oil. Given Russia’s refusal to accept the pumping stop, it only accepts to maintain the current agreed cuts of 1.2 million barrels, Saudi Arabia has resorted to the hard hand, in an implicit recognition that OPEC alone cannot cope with the fall in demand expected in the coming weeks.