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The oil price war between Saudi Arabia and Russia and any reported talks they may or may not be holding have become irrelevant in the context of the Covid-19 outbreak, Petrobras’s chief executive Roberto Castello Blanco said.
“I sincerely think that this dispute between Russia and Saudi Arabia - although the markets reacted positively to some news about President Trump getting involved and what not - has become irrelevant amid the dimension of the (coronavirus) crisis,” the executive said as quoted by Reuters.
Those that celebrated a sharp jump in oil prices yesterday after President Trump tweeted that he expected Russia and Saudi Arabia to agree to cut a combined 10-15 million bpd in production would probably disagree.
The current oil crisis has been called unprecedented by almost everyone commenting on it. But what makes it unprecedented is not the size of the price slump. It is the fact that this price slump comes amid severely dampened demand for oil. And demand for oil was crippled by the coronavirus outbreak and not by market forces of political power plays.
“Oil prices are low because global demand has gone down,” Castello Blanco said, summing up the situation.
Oil demand could plunge by as many as 20 million bpd this month as the outbreak peaks in many countries, including in the world’s biggest consumer, the United States. It seems most forecasts peg the decline at about 20 million bpd. Rystad Energy said earlier this week it could even plunge by more than that: the Norwegian consultancy’s forecast for April oil demand is 77.6 million bpd, down 22.8 million bpd on the year.
The price rally following Trump’s tweet hit a speed bump on Thursday night, but OPEC sources later confirmed that they were indeed discussing a 10 million bpd cut and were meeting on Monday, sending prices higher once again.
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.