As the oil market meltdown intensified a week after the new OPEC+ production cut deal, Saudi Arabia has hinted for a second time in two weeks that it is ready to take further measures with OPEC to restore oil market stability.
At a Tuesday meeting of the Saudi cabinet chaired by King Salman bin Abdulaziz Al Saud, discussed Saudi Arabia's "keenness to achieve stability in the oil market, its affirmation with the Russian Federation of a firm commitment to implement agreed targeted cuts over the next two years, their continuing monitoring of oil market situations closely, and being prepared to take further measures jointly with OPEC+ and other producers," the official Saudi Press Agency reported.
Collapsing global oil demand and shrinking storage capacity have pressured oil prices since the OPEC+ group came up with a new plan to restore 'stability on the market' - its proxy PR buzzword for driving oil prices higher.
The market and analysts, however, see the new deal as 'too little too late' to make a meaningful impact on growing global inventories amid crashing demand.
Despite the OPEC+ deal, prices continued on a downward spiral last week as inventory reports in the United States showed a record-breaking commercial crude build amid crashing demand.
Last Thursday, the energy ministers of Saudi Arabia and Russia, Prince Abdulaziz bin Salman, and Alexander Novak, respectively, held a phone conversation and issued a statement via the Saudi Press Agency saying that both nations were "strongly committed to implement the agreed target cuts over the next two years and will continue to closely monitor the oil market and are prepared to take further measures jointly with OPEC+ and other producers if these are deemed necessary."
Despite the typical Saudi jawboning of the market, the demand destruction and the swelling storage with oversupply nowhere to go led to a historic crash in WTI Crude into negative territory on Monday.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More
Comments
It is far better for countries of the world to implement the strict measures that enabled China to control the outbreak and open the country to business again. This will certainly shorten the duration of the global lockdown and enable people to resume their normal activities including demand for crude oil rather than wasting their time making production cuts which are futile in the current circumstances.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London
With global storage capacity looming and the threat of well shut ins, could this be more damaging in the Saudi conventional oil well set up with water drive? Compared to the unconventional shale wells which can manage shutdown and still maintain viability?
I am no expert in reservoir engineering, but just a thought.
Could it be the real reason that Saudi is contracting a fleet of supertankers, just to keep there production going that bit longer and to delay shutting wells in?