Page 4 - FSUOGM Week 12

FSUOGM COMMENTARY FSUOGM
US considers wading into Russia-Saudi supply war
Washington is looking to intervene in a standoff between Russia and Saudi Arabia that has come at a severe cost to the country’s shale industry
US
WHAT:
The US is looking to intervene in the supply war between Russia and Saudi Arabia.
WHY:
Low oil prices are good for US consumers, but have put significant pressure on the country’s shale oil industry.
WHAT NEXT:
Oil prices could reach as low as $20 in the second quarter. Substantial spending cuts could lead to a sharp rebound after the affects of Covid-19 begin to dissipate.
THE Trump administration is considering intervening in the supply dispute between Russia and Saudi Arabia, reportedly looking at steps to coerce the pair into cutting production to prop up free-falling oil prices,
Oil prices have plunged to levels not seen since the early 2000s, as the coronavirus (COVID-19) continues to erode fuel demand. The end of more than three years of co-opera- tion between Russia and Saudi Arabia on sup- ply cuts earlier this month has exacerbated the situation. Both have announced plans to ramp up production next month after their previously agreed output quotas expire.
Intervention
US President Donald Trump has previously railed against Russia, Saudi Arabia and the rest of the OPEC+ group for making oil too expen- sive for US consumers. With many shale pro- ducers facing bankruptcy if current low prices persist, however, Trump appears to be shifting his position.
“You always get a little torn,” Trump said at a press briefing on March 19. “Until we became
the leading producer, I was always for the person driving the car and filling up the tank of gas... If [prices] were too high, I would always raise hell with OPEC.”
Saudi Arabia had attempted to get the OPEC+ to deepen cuts next month, to support oil prices amid a collapse in demand as a result of the coro- navirus pandemic. Russia refused to back these measures, prompting Saudi Arabia and fellow OPEC+ member the UAE to announce plans to flood the market, causing oil prices to tank. Prices declined further last week, weighed down by the pandemic.
“It hurts a great industry and a very powerful industry,” Trump said referring to the impact on US shale producers. “At the appropriate time, I’ll get involved.”
Washington is contemplating a “diplomatic push” to convince its ally Saudi Arabia to cut its production, the Wall Street Journal (WSJ) reported citing official sources. To prevent Rus- sia from benefitting from this reduction, it will also threaten Moscow with sanctions, according to the newspaper’s sources.
The US has imposed a number of rounds of
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w w w . N E W S B A S E . c o m Week 12 26•March•2020