Oil prices have fallen more than 50% this year as the economic impacts of the epidemic hit nearly a third of global demand.
The price collapse is so exciting that it threatens the budgets and political stability of oil-dependent countries.
We explained this crisis based on oil prices through the “Orbex” blog in our article.Oil is witnessing the worst season in decades, and the worst stocks since 2008!“.
But this week, oil reduced its previous losses, amid signs that Saudi Arabia and Russia are making progress on an agreement to reduce crude oil production, and this is in light of the crisis of the Corona virus epidemic that caused global economic paralysis.
Where the prospect of a new deal spurred a nearly 40% recovery in oil prices last week.
Futures prices for both increased by nearly 37% last week, and this with a decrease of nearly 52% in 2020.
It increased nearly 45% last week, compared to a decrease of nearly 48% so far this year.
However, doubts crept after the OPEC meeting, which was originally scheduled from Monday to Thursday, was postponed as Saudi Arabia and Russia exchanged sharp criticism over who was responsible for the collapse in oil prices.
This delay came hours after the Kingdom of Saudi Arabia launched a sharp diplomatic attack on Russian President “Vladimir Putin”, which opened a new crack between the world’s largest oil exporters, which jeopardizes the deal to reduce production.
After Saudi Foreign Minister Prince Faisal bin Farhan said in a statement early on Saturday that Putin’s comments blame them on Riyadh at the end of the OPEC agreement between the two countries in March that it is completely devoid of the truth.
This dispute showed a decline at the beginning of this week’s sessions on oil prices, and crude oil fell by about 2.80% today, Monday.
Saudi Arabia shows goodwill!
After the Saudis insisted last month to raise their production to a record level, exceeding 12 million barrels per day, which also helped to reduce oil prices significantly.
The Kingdom of Saudi Arabia has returned and postponed its monthly event to determine the prices of the exported oil, and the official selling prices of Saudi Aramco for May will be raised to Thursday after setting a temporary OPEC meeting date on Thursday.
Whereas, Saudi Aramco (SE 🙂 postpones the release of the closely watched monthly oil price list until Thursday, pending the outcome of the OPEC and its prospective allies meeting.
A time race to reach an agreement!
After the end of the OPEC and its allies, which was formed for the first time in 2016, it reflected long-term tensions between the two most important members of the 24-nation alliance.
However, the new agreement must include significant contributions from all OPEC countries, and major producers outside the alliance, including the United States and Canada.
Diplomats involved in negotiations on a global oil deal are pushing to cut supplies to a meeting of energy ministers from the Group of Twenty on April 10, according to people familiar with the situation.
The meeting will be practical to discuss measures to stabilize the market, and oil diplomats are now trying to organize a meeting of energy ministers in the Group of 20 on Friday as part of an attempt to include the United States in the council.
While Saudi Arabia and Russia have both expressed openness to coordinated production cuts, it is not clear that this can be achieved without the participation of the United States and other countries as well.
The goal of the talks unveiled by “Trump” last week is to reduce oil production by about 10%, the largest coordinated drop ever.
However, even if a deal is concluded with up to 10 million barrels per day, this will hardly limit the availability of supplies, which is estimated at up to 35 million barrels per day.
In some corners of the physical market, prices had already turned negative, and traders were putting oil in tankers at a record pace for storage at sea as the Corona virus crisis continued. Challenges to reaching an agreement!
The lack of participation by the United States, the world’s largest producer, could prove a stumbling block, and this despite the original call for agreement.
This is after President Donald Trump described OPEC as a cartel and threatened tariffs on foreign oil to protect the American energy industry.
Where Trump withdrew from a meeting with the American oil industry giants on Friday without any public announcement of a plan to reduce GDP, questioning his ability to broker a truce between Riyadh and Moscow.
This comes in light of the losses of the American shale oil companies’ giants with the current prices, and the corona virus outbreak crisis in the United States to become the largest country currently affected.
Both Saudi Arabia and Russia want the United States to join the agreement, which has become the largest producer in the world thanks to the shale oil revolution, which led to previous price reductions.
But “Trump” had words and said on Saturday at a White House news conference that he opposed OPEC throughout his life, describing it as a cartel or monopoly.
He added that he does not care about OPEC and threatened to use the tariffs if necessary to protect the domestic oil industry until he expected Saudi Arabia and Russia to reach an agreement.
But it is not clear whether Russia and Saudi Arabia will ask the United States to publicly commit to production cuts, which is a challenge to US private and retail industry, or whether a gesture of compromise is sufficient.
Whereas if the Americans do not participate, the problem that existed before for the Russians and the Saudis will remain that they have reduced production while the United States is increasing it, and this makes the whole matter impossible for the future stability of prices.
The oil-producing countries also realize that they are an imam of a hindrance to reaching a diplomatic agreement to reduce production, or that the market will force the closure of production, and this with the full storage in the land and sea due to the decline in demand due to the Corona virus.
On the technical level, the chances of stabilizing crude oil at the highest levels of $ 30 a barrel may depend on the success of the agreement, but any failure to reach new solutions may push oil prices to return below the level of $ 20 a barrel.
– You can view our main article through direct market coverage on the Orbex Blog from (Here).
– To follow up on my articles directly through my Twitter account: @ Abdelhamid_TnT