The news was quickly followed by reports about Saudi Arabia's plans to triple its oil shipments to Europe at massive discounts, in a move that risks crushing prices once again. The UAE, home to Abu Dhabi and Dubai, said it would stand ready to increase production to 4 million barrels of crude a day, up from the 3 million it now pump.
"It's a problem of an oil price war in the middle of a constricting market when the walls are closing in", United States energy historian Daniel Yergin said.
Crude futures plunged over 30% at one point on Monday, the largest one-day slide since the 1991 Gulf War, after the Organization of the Petroleum Exporting Countries and allies including Russian Federation, known as OPEC+, failed to agree an extension to their output cuts.
The oil market is headed for its largest weekly collapse since 2008 as a bitter price war erupted between OPEC and its allies, and demand cratered from the coronavirus outbreak.
There had been talk of a bromance between Putin and bin Salman. The UAE now pumps around three million barrels per day but it has earmarked more than $132 billion in investments to raise its output capacity to 4 million bpd this year and to 5 million bpd in a decade's time.
Aramco's 2018 net of US$111 billion made it by far the world's most profitable company, exceeding the combined incomes of some of the world's biggest companies including Apple Inc., Samsung Electronics Co. and Alphabet Inc.
Romney Stands Up Against Probe Into Hunter Biden and Burisma
Senator Gary Peters, the committee's top Democrat, said he believes Republican members have qualms about the probe . Romney's support means Republicans have enough votes to issue the subpoena; they control the committee, 8-6.
Both nations should be able to endure a protracted economic war, as Saudi Arabia has foreign reserves of $ 490 billion and Russian Federation has reserves of $ 440 billion. After taking instructions from President Vladimir Putin, Novak walked out on the Saudi initiative in Vienna. The renewed oil price slump has hit countries revenues.
However, Moscow declared it had had enough. Further cuts would simply hand further gains to the Americans.
"The avenues for a quick off-ramp to the Saudi/Russia price war appear to be closing", RBC Capital Markets analyst Helima Croft said. It needs oil prices of around $82 a barrel to balance its budget. If prices remained at the current level, it would translate to a loss of around $US900 billion in revenue for producers. "They [the U.S.] can buy oil at the lowest price in years", he added.
The Saudis have tried a tactical flooding of the market before. The strategy did not succeed and the shift two years later to restraint in an alliance with Russian Federation was the response.
Shale production has brought the United States to first place as the world's largest oil producer. Yet one of the world's biggest oil traders, Trafigura Group, now expects oil demand to contract by as much as 10 million barrels a day due to the coronavirus outbreak. The source talked about working to pursue a different outcome - arguing that the Russians came to the meeting determined to end the expansion of U.S. shale producers. Recent US sanctions against Rosneft and the Nord Stream-2 pipeline from Russian Federation to Germany may also come into this, he added. Occidental Petroleum in the U.S. cut its dividend to shareholders by nearly 90% this week.
Oil prices have fallen about 24% to $32.97, which is a big drop, and they aren't stopping here.