Oil Price Collapse Is OPEC, Russia's Revenge Against Shale

Oil Price Collapse Is OPEC, Russia's Revenge Against Shale:

When Saudi Arabia, Russia, and other oil-producing countries met in Vienna last week, they debated who should slash oil output to offset the collapse in demand due to the coronavirus outbreak. When the meeting was over, the answer was clear: America.

Last week’s drama between Saudi Arabia and Russia, the world’s two largest oil producers after the United States, made for a historic meeting of the Organization of the Petroleum Exporting Countries (OPEC) that may cripple the organization’s credibility for years to come—and undermine the shale revolution in the process. 


While past oil shocks have been driven by either supply or demand, the price collapse of 2020 is highly unusual in oil market history: It results from a massive demand shock and a huge supply overhang at the same time.

With the economic slowdown from the coronavirus outbreak projected to cause the first annual drop in oil demand since the global financial crisis in 2009, oil prices had already plunged 20 percent in the lead up to last week’s meeting of the so-called OPEC+ group, which includes both OPEC members and several other oil-producing countries, most notably Russia. As the extent of the demand drop became clear, Saudi Arabia pushed the other OPEC+ countries to agree to the steepest supply cuts in more than a decade.