The price of crude oil collapses massively. Since Friday, it has fallen by 30%, but it could fall even further in the short term. Contrary to our expectations, Opec and Russia could not agree on a necessary reduction in production within the framework of the expanded Opec (Opec+). This means that the alliance now exists only on paper. However, against the background of the acute weakness in corona demand, a cutback would have been very important and right. The growth in demand is likely to be small at 0.2 MMBD in 2020. Russia’s energy policy motivation is to put pressure on the US drillers. Too often (according to Russian interpretation) the Americans tried to spit the Russians into the „energy soup“. US sanctions against the Russian state oil producer Rosneft in Venezuela as well as sanctions against companies involved in the completion of the Nord Stream 2 gas pipeline are just two examples.
Both the Saudis and the Russians left Vienna and already announced an increase in production. An imminent price war between Saudi Arabia and Russia has therefore become very likely. In response to the situation, Saudi Aramco has already drastically reduced export prices on Saturday. Riyadh apparently accepts the price war. For the time being, the USA will also not shy away from keeping its production high. Apparently, all parties involved want to secure market shares. Now, the oil price is threatened by both the demand („corona“) and the supply side („price war“). The most recent such situation between the USA and the Saudis occurred in 2014/2015, when the oil price fell from over USD 100 to below USD 30 within a year. Before the oil price rises again with a view to the second half of the year, driven by positive catch-up effects on the demand side thanks to higher refinery capacity utilisation in China, price pressure will remain increased in the short term. By the end of the year, however, the oil price should reach a level of around USD 50 again.