OPEC+ talks ended in dramatic failure, auguring the end of a diplomatic alliance between Saudi Arabia and Russia that has underpinned crude prices and changed the balance of power in the Middle East.
Oil fell more than 9% after Russia refused to bend to the will of Saudi Arabia, whose high-stakes gamble took the group to breaking point.
Saudi Arabia wanted to slash production to offset the hit to demand from the coronavirus. But Moscow had a different idea. Russia’s budget is more resilient to low prices than its Middle Eastern allies and it’s betting that weak crude values will help wipe out competition from U.S. shale.
It’s bad news for energy giants like Exxon Mobil Corp., resource-dependent countries from Latin America to Central Asia, and companies like BP Plc trying to reinvent themselves as greener producers. Low prices will help some economies though, as a welcome stimulus in the face of the raging virus.
The breakdown is the biggest crisis since Saudi Arabia, Russia and more than 20 other nations created the OPEC+ alliance in 2016. The group, controlling more than half of the world’s oil production, has underpinned prices and reshaped the geopolitics of the Middle East — increasing President Vladimir Putin’s clout in the region. But it’s come under increasing strain over the past year.
Oil traders will now be looking for signs of whether Saudi Arabia, Russia or any of the other OPEC+ nations — unshackled from the cartel’s restrictions and with budget holes to fill — could actually increase production. It’s possible that they will, said one delegate.
“Given today’s decision, all OPEC+ countries from April 1 have no obligations to cut output,” Russian Energy Minister Alexander Novak told reporters, signaling the…
Source: FuelFix
