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Tom Kool

Tom Kool

Tom majored in International Business at Amsterdam’s Higher School of Economics, he is Oilprice.com's Head of Operations

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Oil Climbs As U.S. Pushes For An End To The Price War

Oil prices continued to rise for the third day in a row, recovering earlier losses as U.S. lawmakers pressure Saudi Arabia to end the oil war.

The ongoing oil war, in which Saudi Arabia and Russia are the key players, has exacerbated the already tremendous glut in oil markets, and demand destruction could end up reaching 15-20 million bpd in April.

According to Russell Hardy, Vitol’s chief executive, the supply overhang could end up filling storage tanks at a very high pace as India, with the world’s fastest-growing oil consumer now facing a nationwide lockdown.

Oilprice.com’s Julianne Geiger wrote yesterday that Washington is growing increasingly concerned that the current situation in markets is doing serious damage to U.S. shale producers and that a series of high profile bankruptcies in the U.S. oil patch could end up crushing the administration’s dream of energy independence.

The Trump administration is now facing a difficult task as large shale producers such as Continental Resources and industry bodies such as the API are asking for help, but direct intervention in the form of subsidies to heavily indebted oil companies is facing serious political opposition. Related: Saudi Arabia And The U.S. Could Form The World’s Newest Oil Cartel

Last week, President Trump said that he would get involved at ‘’the appropriate time’’, but as oil prices continue to languish around $25 per barrel, time is quickly running out.

Today, Washington decided to step in, with Secretary of State Pompeo speaking with Saudi Crown Prince Mohammed Bin Salman, addressing the effects of the coronavirus on the global economy and the oil markets. Pompeo called on Saudi Arabia to stabilize markets as he stressed "that as a leader of the G20 and an important energy leader, Saudi Arabia has a real opportunity to rise to the occasion and reassure global energy and financial markets when the world faces serious economic uncertainty,”

As I have previously discussed, increased pressure on Saudi Arabia or Russia is unlikely to work as neither of the parties in the oil war is happy to back down without bringing back home at least some kind of victory.

The most important question now for oil market observers is this. If Washington fails to inspire Saudi Arabia and Russia to stop the oil war by asking nicely, will it use the ‘nuclear option’?

By Tom Kool of Oilprice.com

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Leave a comment
  • Bradley Steeg on March 25 2020 said:
    Too late. Banks already sniffed out the fact traditional oil is now and forever a risky loan. If shale wants to survive it will have to innovate again; shale will need to go net zero CO2 then convince governments to mandate net zero GHG oil.

    Permian shale fields will need to install Allam cycle nat gas plants to air capture CO2 and use it for enhanced extraction. No more flaring, it all gets captured and sequestered deep under ground.
  • Wayne Briggs on March 25 2020 said:
    You know I was liking this article right up to the last few words.

    Not Kool Tom!

    Nuclear from the US over oil is just silly thinking.
  • Sajid Naqvi on March 26 2020 said:
    The only realistic solution I see here is that all Oil producing countries sit on the table and agree on Production cuts including USA, Canada, Mexico, Brazil etc. It is no point for OPEC to cut their production again and again and someone else use this production cut to their advantage.

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