A spokesman for the Kremlin denied last week, that Russia and Saudi Arabia are engaged in an oil price war.
Dmitry Peskov simply stated: “There is a very unfavourable pricing environment for many countries.”
He affirmed that the world’s two biggest oil exporters have “good relations, a partnership” and said that the Russian government does “not think that anyone should intervene in these relations.”
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This was a not-so subtle allusion to US president Donald Trump, who recently stated: “It's very devastating to Russia, because their whole economy is based on that and we have the lowest oil prices in decades. I would say it's very bad for Saudi Arabia."
Following widespread shutdowns of Chinese industry, the Organisation for the Petroleum Exporting Countries (OPEC) tried to convince its ally Russia to commit to attempts to buoy the price of oil by further limiting output. When Russia refused, Saudi Arabia flooded the market triggering the largest crash in oil prices since the First Gulf War in 1991.
Vladimir Putin has emphasised Russia’s decreasing dependence on oil exports and argued that the Russian economy can survive with oil prices around $20 per barrel for up to ten years. Saudi Arabia, ideally requires an oil price of $80 to balance its books.
The surge in oil supply, concomitant with a continued slump in demand as a result of the spread of Covid-19 across Europe and North America has put an effective end to the USA’s shale boom, with many firms on the edge of bankruptcy.
This could explain in part recent reports that the White House is planning to intervene in the spat by convincing Saudi Arabia to further curb production while threatening Russia with significant sanctions.
With some analysts predict oil prices to dip below $20 or even turn negative as reserves well up and lockdowns continue, this game of brinkmanship could prove too much for all sides.
By early-afternoon Monday trading, Brent crude oil futures have fallen 2.59 per cent to $26.28 per barrel, while WTI crude oil futures have gained 0.97 per cent to $22.85 having recently slumped to an 18-year low.