Saudis Hold Firm, No Talks With Russia on Oil Output Cut

Daniel Fowler
March 28, 2020

"There have been no contacts between Saudi Arabia and Russian Federation energy ministers over any increase in the number of OPEC+ countries, nor any discussion of a joint agreement to balance oil markets", an official from Saudi Arabia's energy ministry was quoted as saying by Reuters in reference to the wider grouping of oil producers.

There have been few signs of a thaw developing since, but Kirill Dmitriev, head of Russia's sovereign wealth fund, said Friday a new OPEC+ deal to balance oil markets might be possible if other countries join in.

Evidence of the demand hit can be seen by the fact that Saudi Arabia is struggling to find customers for its extra oil, Reuters reported, citing industry sources.

The U.S. Secretary of Energy, Dan Brouillette, pointed out that forging a crude oil alliance, including Saudi Arabia and the United States, was one of ideas discussed in Washington. Saudi Arabia and its allies moved to increase crude output in early March after Russia's energy ministry said it could not agree to more cuts in output, leading Riyadh to flood the market and kick off a price war.

Oil prices rose on Friday as governments around the world pledged a huge injection of funds and other measures to limit the economic fallout from the coronavirus pandemic, despite fears the outbreak will destroy demand for oil.

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Oil companies were seeking to cut April allocations of Saudi crude by as much as 25%, the report added.

According to WSJ, Saudi Arabia may need to cut prices even further as worldwide benchmark Brent has fallen below even the discounted rates at which the country is looking to sell.

While the oil war between the oil giants is taking further roots, various analysts and independent forecasters assess that there would be no production control over the coming period, which makes it hard to measure the inventory surplus ahead; thus, indicating towards higher volatility and event-driven price movement ahead.

Russian Federation has been sending mixed messages.

"Unlike the financial markets, the oil market is apparently finding it hard to look beyond the current crisis", said Commerzbank analyst Eugen Weinberg. The ongoing pricing war between them along with weaker demand for oil in the wake of the coronavirus outbreak is putting significant pressure on oil, with Brent crude oil futures (CFD) slipping from its recent top of Dollars 53.90 a barrel (intraday high on 3 March 2020) to the present low of USD 24.52 per barrel (intraday low on 18 March 2020), which marked a price fall of ~ 54.50 per cent.

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