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Oil prices took another nosedive today after during the weekend Russia and Saudi Arabia postponed a meeting scheduled for Monday as they went at each other’s throats trading blame for the price collapse.
Earlier today, CNBC quoted the head of Russia’s sovereign wealth fund Kiril Dmitriev as saying that Russia and Saudi Arabia were “very, very close to a deal”.
The spike in hostility between Riyadh and Moscow did not bode well for the outcome of the meeting although the price situation is serious enough to motivate overlooking the differences the two might have regarding whose fault the crisis is, as the CNBC report suggests. However, a Bloomberg report from last week has indicated Russia would only agree to cuts if the United States cuts, too. This might make an agreement tricky as the U.S. has not signaled any readiness to join any cuts.
Producers, meanwhile, are struggling to cope. Algeria’s energy minister said yesterday all oil producers should agree to reduce their production and implement it immediately.
The situation in oil is unprecedented as the coronavirus outbreak, which has so far infected more than 1 million people globally has crippled demand to such an extent that some experts are warning of a looming storage capacity shortage that would push prices even lower.
Related: Big Oil Raises Debt To Ride Out Price Crash
According to Vitol’s Russell Hardy and IHS Markit’s Daniel Yergin, the effect of the outbreak on oil demand would be about 20 million bpd during the peak of the crisis. The International Energy Agency’s Fatih Birol agrees and is even more pessimistic: he said, as quoted by Reuters, that the impact of the coronavirus pandemic on oil demand could reach a quarter of the average daily, which is close to 100 million bpd.
At the time of writing, Brent crude was trading at $33.46 a barrel, with West Texas Intermediate at $27.33, both down from Friday’s close, WTI by more than 3 percent and Brent crude by close to 2 percent, but both still higher than the troughs seen earlier this month, before President Trump’s tweet.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.