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Even a Saudi-Russia Truce Would Be Too Late to Save OPEC+ Legacy


27 March 2020

On Thursday, the States held an urgent teleconference between leaders of the G-10 countries to discuss how to encourage the Saudis to make peace with the Russians.

Even if President Donald Trump could resolve the conflict between the two exporters, the kingdom had already committed to flood the crude oil market next month. And Moscow in every possible way makes it clear that it will not work. The ceasefire would stop a further collapse in prices, but it is too late to save relations between the former partners, who, until this month, together supported the oil market in a state of equilibrium.

Back in 2016, when Saudi Arabia and Russia led the global alliance of oil-producing countries, known as OPEC, the main motive for cooperation was the desire to reduce the oversupply of 300 million barrels of oil in industrialized countries, which prevented price increases.

But now the kingdom is pumping oil at full strength, producing 12 million barrels a day, and demand is falling due to the coronavirus. Goldman Sachs Group Inc estimates that stocks will rise 20 million barrels per day next month.

Even assuming that storage tanks are capable of holding such a volume, everything OPEC+ has achieved in recent years of casualties and reductions will be destroyed in one month.

#source

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