EPC | 19 May 2020
The policies adopted by the leading countries in the oil market influence the shape of the market and how it responds to changes. In March 2020, Russian policy drew the country into a price war with Saudi Arabia, leading to a sharp drop in crude oil prices. In response, the USA changed its short-term approach in order to protect the US shale oil industry, by pushing for an end to the Russian–Saudi price war and the completion of the OPEC+ deal, which was concluded on April 12. The deal is evidence of the many overlapping interests that these countries share, which enabled them to reach a deal on a number of policies despite having different objectives for the oil market.
EPC | 10 May 2020
Oil markets have experienced their biggest crisis in the modern age. The negative dimensions of the coronavirus crisis and the price war crisis between Saudi Arabia and Russia have greatly affected the oil sector in terms of prices and existing and future investments. Those crises have brought the sector to a standstill. On the one hand, the shock has been unprecedented for the global energy markets in terms of both the speed of its spread and the size of its impact. On the other hand, the spread of coronavirus has led to the collapse of global demand for liquefied natural gas (LNG) and disrupted industrial production.
With regard to investments in the oil sector, one of the main effects of the oil supply crisis today is the announcement by major companies in the oil sector of reducing capital expenditures, particularly in the area of exploration and development of new oilfields. Low oil prices will be translated into higher oil prices in the future if investments in drilling, exploration and production are halted.
EPC | 27 Apr 2020
Saudi Arabia went to a price war with Russia in March 2020 after Russia refused to renew the deal to cut production (the OPEC+ deal) with further cuts to counter the crisis of demand shortage as a result of the decline in global consumption. Saudi Arabia resorted to dumping the market with crude oil to pressure all producers, particularly Russia. Capable of dealing with low oil prices for a limited period due to its need of a barrel price close to the 60-80 dollar level to support its economic plans, Saudi Arabia opted to pressure Russia which had claimed to be capable of accommodating oil prices close to 20 dollars for long periods. However, experience has demonstrated that Russia is incapable of going on after having suffered from low prices. US shale oil industry was also affected, which confirmed that the step of dumping the market was a negative one for all parties.