Saudi Arabia-Russia standoff pertaining to oil production policies amid coronavirus outbreak has put oil markets in a harsh situation. The two countries are major players in the industry, thus making the effect more powerful.
Saudi Arabia, being the dominant figure of Organization of the Petroleum Exporting Countries (OPEC), is targeting European refiners, Russian refiners’ market. Accordingly, this is the first time the kingdom is prioritizing markets outside of Asia.
Previously, Saudi refiners are busy handling huge oil demands from Asia alone. Non-Asian countries are usually the market of other big players, such as Russia and the US.
However, due to the recent disagreement between Saudi Arabia and Russia, Saudi Arabia plans to ‘attack’ Russia. Among the plans is to sell crude oil products at a lower price but higher volume.
Experts are afraid that the move will immobilize the market as it causes massive overproduction. Overproduction will lead to market downfall as the demands for oil products are going low, thanks to COVID-19.
Also Read: The Coronavirus Outbreak to the Global Oil
What Caused Saudi Arabia-Russia Oil War
The oil war between Saudi Arabia and Russia started because of disagreement regarding oil production cut. The intended cut is, actually, an attempt to adapt to the slowing market due to coronavirus outbreak.
Along with the OPEC+ members, Saudi Arabia intends to cut production to adapt to the market. Russia, being a non-OPEC member, refuses to go along with the proposition.
“From April 1, neither we nor any OPEC or non-OPEC country is required to make output cuts,” said Alexander Novak, Russia’s energy minister.
Angered by the disagreement, Saudi Arabia on Saturday announced that it will increase oil production and cut price. This is, accordingly, an ultimatum to Russia.
“I fail to see the wisdom for holding meetings in May-June that would only demonstrate our failure in attending to what we should have done in a crisis like this and taking the necessary measures,” said Saudi Energy Minister Abdulaziz bin Salman.
Markets did not accept the reaction well. At some point on Monday, the prices were down to almost 30%.
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