“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
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.Click HERE to subscribe to Fuller Treacy Money Back to top