Time To Blink In COVID-Infected Oil Price War
As the oil price war continues, with the Saudis holding out and flooding the market with oil, the next logical stage is full-beyond-capacity storage facilities. It’s a situation that has some worried we could see oil drop below $10 a barrel.
Last week, we said that our high-level sources are confident that the Saudis will not let this completely destroy the American shale patch, while the Russians are gunning for just that. Our sources still stand by that scenario from the Saudi perspective, while the Russians are getting media out there to the effect that the U.S. is about to lose the war over European market share.
But what is happening here is that the oil price war is being compounded by the coronavirus and a near-global slowdown of activity, so we’re going to reach $15 oil a lot faster than we would otherwise.
The difficult part to predict will be the psychology of MBS and Putin - two very strong personalities who cannot back down without a clear, agreed-upon path that makes it look like they both won in different ways.
But Russia stands to lose nearly $40 billion in this game, and the Saudis can withstand more. MBS will force Russia to blink first, even if Moscow insists it’s going to keep pumping all the way to $10 oil. Saudi Arabia on Wednesday said it would pump 12.3 million bpd into the market over the coming months as a direct challenge to Russia. The…