To Stop Oil Price War, Trump Must Strike Deal With Russia, Saudi - Bloomberg:
Don’t expect Russia or Saudi Arabia to bail out shale again. Balancing the oil demand destruction resulting from the global spread of the Covid-19 virus requires action from all producers, and the leaders to make it happen.
The forecasts for oil demand are grim. Analysts from Goldman Sachs Group to Macquarie Group and commodities trader Trafigura Group estimate the peak hit to global demand will be anywhere from 8 million barrels a day to 11.4 million. Consultancy IHS Markit says global oil markets face the possibility of the biggest crude surplus ever recorded. That is too big for any single producer, or small group of producers, to deal with alone. And it’s become painfully clear that they have no appetite to do so anyway.
In the space of two weeks Saudi Arabia has gone from being threatened with legal action in the U.S. for holding oil off the market to facing calls for legal action against it for flooding the market with it. It’s not lost on the kingdom's leaders that the people who accused them of artificially inflating the price of oil by not pumping at capacity are the same ones who are now accusing the country of dumping crude since it opened the taps.
Don’t be surprised that it has no desire to ride to anyone’s rescue. No doubt it would only be pilloried again for pushing prices up as soon as motorists complain about the cost of filling their tanks.
Don’t expect Russia or Saudi Arabia to bail out shale again. Balancing the oil demand destruction resulting from the global spread of the Covid-19 virus requires action from all producers, and the leaders to make it happen.
The forecasts for oil demand are grim. Analysts from Goldman Sachs Group to Macquarie Group and commodities trader Trafigura Group estimate the peak hit to global demand will be anywhere from 8 million barrels a day to 11.4 million. Consultancy IHS Markit says global oil markets face the possibility of the biggest crude surplus ever recorded. That is too big for any single producer, or small group of producers, to deal with alone. And it’s become painfully clear that they have no appetite to do so anyway.
In the space of two weeks Saudi Arabia has gone from being threatened with legal action in the U.S. for holding oil off the market to facing calls for legal action against it for flooding the market with it. It’s not lost on the kingdom's leaders that the people who accused them of artificially inflating the price of oil by not pumping at capacity are the same ones who are now accusing the country of dumping crude since it opened the taps.
Don’t be surprised that it has no desire to ride to anyone’s rescue. No doubt it would only be pilloried again for pushing prices up as soon as motorists complain about the cost of filling their tanks.
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