Saudi Will Only Cut Oil Output if Others Do, EA's Sen Says
Comment of the Day

April 02 2020

Commentary by Eoin Treacy

Saudi Will Only Cut Oil Output if Others Do, EA's Sen Says

This article by Laura Hurst for Bloomberg may be of interest to subscribers. Here is a section:

“It’s very clear that Saudi Arabia is maintaining its position - it will cut only if everyone else cuts,” Energy Aspect’s Amrita Sen says in a Bloomberg TV interview.

Russia does not see benefit in cutting production given the 20m b/d drop in demand “No way” Saudi Arabia can cut enough to compensate for such a decline

NOTE: Sen speaks following U.S. President Donald Trump’s tweet saying he expects Saudi Arabia and Russia to cut production by 10m bbl

There could be a deal later in the year, but it’s too early as it is unclear how low demand will go; “There’s a lot of hope and expectation rather than anything concrete”

Market will correct through market mechanisms; Energy Aspects believes world will run out of storage in May, producers will then have no choice but to shut production, but prices will remain low

It’s unlikely that the U.S. would ever join Russia and Saudi Arabia in coordinated cuts

“How do you get the U.S. to join something that it would call a cartel?”; there are thousands of producers in the U.S., so it would be impossible for the country to cut

Eoin Treacy's view

The shock from the coronavirus lock down is still rippling through the energy markets but that is not why Saudi Arabia chose now to launch a price war with Russia. They are much more concerned with the fact oil demand growth is slowing down, if not contracting, on a secular basis. That presents singular problems for countries who entire existence is predicated on oil exports.

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