Saudi Arabia’s risky game of Russian roulette with oil could end in tears:
Oil markets have been caught in the eye of a storm between the fears of coronavirus and bickering between Saudi Arabia and Russia at Opec. Some industry veterans now fret this high-stakes game of roulette could see the value of a barrel of the global economy’s lifeblood tumble below $20. They may be right.
Brent crude suffered its biggest fall since the start of the Gulf war in 1991 in London trading on Monday. The benchmark – which helps set the price for almost $1.3 trillion of crude – has halved in value since the beginning of the year, with its value plummeting below $34 per barrel. But worse may be to come.
Qatar’s former oil minister and president of Opec Abdullah bin Hamad Al-Attiyah fears markets are entering into uncharted territory. “I saw the first shock and the first collapse and this is worse,” warns the oil and gas industry veteran in an interview with S&P Global Platts. “My expectation is for oil to fall below $20 per barrel. We have seen it before.”
The reasons for his concerns are two-fold. Firstly, a three-year old pact between Riyadh and the Kremlin to manage the price of oil has collapsed, perhaps irrevocably. In response to plummeting prices caused by the coronavirus outbreak, Saudi Arabia had hoped for Opec and its allies to extend 1.7 million barrels per day of production cuts through to the end of 2020, with a top-up of a further 1.5 million barrels per day.
Oil markets have been caught in the eye of a storm between the fears of coronavirus and bickering between Saudi Arabia and Russia at Opec. Some industry veterans now fret this high-stakes game of roulette could see the value of a barrel of the global economy’s lifeblood tumble below $20. They may be right.
Brent crude suffered its biggest fall since the start of the Gulf war in 1991 in London trading on Monday. The benchmark – which helps set the price for almost $1.3 trillion of crude – has halved in value since the beginning of the year, with its value plummeting below $34 per barrel. But worse may be to come.
Qatar’s former oil minister and president of Opec Abdullah bin Hamad Al-Attiyah fears markets are entering into uncharted territory. “I saw the first shock and the first collapse and this is worse,” warns the oil and gas industry veteran in an interview with S&P Global Platts. “My expectation is for oil to fall below $20 per barrel. We have seen it before.”
The reasons for his concerns are two-fold. Firstly, a three-year old pact between Riyadh and the Kremlin to manage the price of oil has collapsed, perhaps irrevocably. In response to plummeting prices caused by the coronavirus outbreak, Saudi Arabia had hoped for Opec and its allies to extend 1.7 million barrels per day of production cuts through to the end of 2020, with a top-up of a further 1.5 million barrels per day.
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