Russia and Saudi Arabia are duking it out and it has sent world oil prices plummeting.
The Saudis have been trying to close the taps on oil production in hope of ending the worldwide glut that has depressed prices. On Friday Russia, which is not an OPEC member, said it wouldn't play along.
The Saudi decision to cut prices by nearly 10 percent on Saturday was a dramatic move in retaliation for Russia’s refusal on Friday to join the Organization of the Petroleum Exporting Countries in a large production cut as the coronavirus continues to slow the global economy and, with it, demand for oil.
The break in a three-year alliance between the Saudi-led oil cartel and Russia to support prices may be temporary. The moves over the weekend may well have been part of a negotiating chess game, and the Saudis and Russians can still reach a compromise. But if the collapse is lasting, oil executives say there is nothing to stop oil prices from tumbling to the lowest levels in at least five years.Business Insider has reported that, as of the end of business today, world oil prices have dropped 31 per cent.
“If a true price war ensues, there will be plenty of pain in the oil markets,” said Badr Jafar, president of Crescent Petroleum, a United Arab Emirates oil company. “Many will be bracing for the economic and geopolitical shocks of a low-price environment.”
Oil futures tumbled 31% in a matter of seconds overnight on Sunday, their sharpest decline since the Gulf War in 1991. The losses are being fueled by sinking demand due to coronavirus concerns, which has in turn sparked a series of price cuts.
Saudi Arabia slashed its prices by the most in at least 20 years over the weekend. A price-cut free-for-all has broken out globally following the collapse of an OPEC+ alliance last week.Business Insider contends this is the biggest world oil price crash since the Gulf War of 1991.
Gee, this sounds like a great moment to be doubling down on expanding production of the high-cost/high-carbon/low value Athabasca bitumen, eh?