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Oil Price War
Following a disagreement between Russia and the OPEC members over oil production at the OPEC Plus summit on Friday, March 6, 2020, Saudi Arabia retaliated by
increasing its crude oil production. As a result, oil prices on world markets have
reached their lowest level in recent years. On that date, Brent crude oil fell to $32.5
and West Texas Intermediate (WTI Crude Oil) fell to $30.07 a barrel. Shares of S&P
500, Dow Jones, and NASDAQ fell sharply (down 6% on average). March 9, 2020,
was interpreted as “Black Monday” following the announcement of the “fall of Wall
Street,” and these developments affected the US economy for weeks (wsj.com
2020a, b).
In practice, before March 6, 2020, OPEC Plus was a coalition led by Moscow
and Riyadh to regulate the market with the volume of production and supply and the
determination of a common policy; for this reason, Moscow’s opposition to the
reduction in production was interpreted as the death or collapse of OPEC Plus, and
this was the beginning of a new shock to world oil markets. Following this oil war
between Saudi Arabia and Russia, the second and third-largest oil producer in the
world, the Saudi National Oil Company, Aramco, said it would increase daily production to 12.3 million barrels in April 2020. The Russian Ministry of Energy also
announced its intention to activate its empty capacity of 500,000 barrels and a production capacity of 11.8 million barrels per day (wsj.com 2020a, b).
Meanwhile, the US government sought to persuade Russia and Saudi Arabia to
end the oil price war. The war, which coincided with the outbreak of the Coronavirus,
pushed global oil prices to $20 and diminished Donald Trump’s economic gains,
from oil jumps and stock market indexes to economic growth and employment,
7 months before the US presidential election. Donald Trump has always considered
the rise in the value of the stock index on “Wall Street” before the Corona outbreak
as one of the presidential successes and one of his winning cards. The announcement of the immediate meeting of OPEC Plus, which was supposed to take place on
Monday, April 6, 2020, finally took place on Thursday, April 9, 2020. The result of
US consultations was to save shale oil producers: Oil that, if such conditions continue, would not be profitable to increase production (cnn.com 2020a, b).
The OPEC Plus Summit, April 2020
After nearly 2 months of disagreements, at a meeting on Thursday, April 9, 2020,
the OPEC and non-OPEC producing countries, led by Russia, agreed to cut production by ten million barrels per day. Despite talks on further cuts, production continues. Under the agreement, Saudi Arabia reduced its daily production by four million
barrels in April 2020, and Russia has agreed to reduce its crude oil production by
two million barrels per day. Other countries are set to cut production by five million
barrels a day, according to Reuters. None of the countries outside the OPEC group
Oil Price War
Oil Price War
Following a disagreement between Russia and the OPEC members over oil production at the OPEC Plus summit on Friday, March 6, 2020, Saudi Arabia retaliated by
increasing its crude oil production. As a result, oil prices on world markets have
reached their lowest level in recent years. On that date, Brent crude oil fell to $32.5
and West Texas Intermediate (WTI Crude Oil) fell to $30.07 a barrel. Shares of S&P
500, Dow Jones, and NASDAQ fell sharply (down 6% on average). March 9, 2020,
was interpreted as “Black Monday” following the announcement of the “fall of Wall
Street,” and these developments affected the US economy for weeks (wsj.com
2020a, b).
In practice, before March 6, 2020, OPEC Plus was a coalition led by Moscow
and Riyadh to regulate the market with the volume of production and supply and the
determination of a common policy; for this reason, Moscow’s opposition to the
reduction in production was interpreted as the death or collapse of OPEC Plus, and
this was the beginning of a new shock to world oil markets. Following this oil war
between Saudi Arabia and Russia, the second and third-largest oil producer in the
world, the Saudi National Oil Company, Aramco, said it would increase daily production to 12.3 million barrels in April 2020. The Russian Ministry of Energy also
announced its intention to activate its empty capacity of 500,000 barrels and a production capacity of 11.8 million barrels per day (wsj.com 2020a, b).
Meanwhile, the US government sought to persuade Russia and Saudi Arabia to
end the oil price war. The war, which coincided with the outbreak of the Coronavirus,
pushed global oil prices to $20 and diminished Donald Trump’s economic gains,
from oil jumps and stock market indexes to economic growth and employment,
7 months before the US presidential election. Donald Trump has always considered
the rise in the value of the stock index on “Wall Street” before the Corona outbreak
as one of the presidential successes and one of his winning cards. The announcement of the immediate meeting of OPEC Plus, which was supposed to take place on
Monday, April 6, 2020, finally took place on Thursday, April 9, 2020. The result of
US consultations was to save shale oil producers: Oil that, if such conditions continue, would not be profitable to increase production (cnn.com 2020a, b).
The OPEC Plus Summit, April 2020
After nearly 2 months of disagreements, at a meeting on Thursday, April 9, 2020,
the OPEC and non-OPEC producing countries, led by Russia, agreed to cut production by ten million barrels per day. Despite talks on further cuts, production continues. Under the agreement, Saudi Arabia reduced its daily production by four million
barrels in April 2020, and Russia has agreed to reduce its crude oil production by
two million barrels per day. Other countries are set to cut production by five million
barrels a day, according to Reuters. None of the countries outside the OPEC group
Oil Price War