USA mulls cuts amid Saudi-Russia price war

Daniel Fowler
March 22, 2020

US crude prices notched a weekly loss of 29 per cent, the steepest since the outset of the US /Iraq Gulf War in 1991.

Oil kept climbing after its biggest ever single-day gain as U.S. President Donald Trump waded into the price war between Saudi Arabia and Russian Federation that has rocked crude markets amid slumping demand. Supply restraint by core OPEC producers could push up second-quarter Brent prices to $30 a barrel, while USA measures to support the market could underpin prices in the near term, Goldman Sachs said in a research note.

"The uncertainty of what will happen is still an overhang and destabilizing markets", said Ryan Fitzmaurice, commodities strategist at Rabobank.

Even a smaller contraction would far outstrip any production cuts that the OPEC+ alliance discussed two weeks ago, when Saudi Arabia tried and failed to convince Russian Federation to agree to a fresh 1.5 million barrels a day reduction.

Mr Sitton also said he had spoken with the Organisation of Petroleum Exporting Countries' (Opec) secretary-general Mohammad Barkindo about an worldwide deal "to ensure economic stability as we recover from the coronavirus outbreak".

COVID-19 kills 4 in same New Jersey family
Monmouth County had 32 known reported cases of coronavirus as of Thursday, according to the state Department of Health. There are more than 6,500 recorded cases of the novel coronavirus across the United States , and 115 people have died.

"With other governments manipulating oil markets, it's fair to ask: Why shouldn't our government step in to try to reinstate a more market-based approach?"

Sitton said production limits could be implemented quickly, though no one who works at the agency was around the last time the state limited production, in the early 1970s.

The plan comes as the nearest timespread for the US benchmark indicated its deepest oversupply since 2016. The sector has so far scaled back operations and is also threatened with a wave of bankruptcies. Citing statistics, on Friday's (March 20th) market wrap up, United Kingdom crude futures' prices were plunged 5.2 per cent to settle down at $26.98 per barrel, while the US West Texas Intermediate crude oil futures' scheduled to be expired on April, tumbled as much as 10.7 per cent to wind up the day at $22.53 a barrel.

Since dropping below $25 a barrel this week, an 18-year low, Brent crude has swung violently, with investors trying to assess the impact of OPEC+ output increases against falling demand due to measures to contain Covid-19.

-With assistance from Dan Murtaugh, James Thornhill, Alex Longley, Sharon Cho and Javier Blas.

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