Russia refuses to spare American producers of shale oil, whose OPEC + subsidizes production by supporting oil prices. And Saudi Arabia is trying to take Russia by surprise, by regaining market share as quickly as possible internationally.
Why Russia relaunched the oil price war Russia has temporarily shut down the door to OPEC +, refusing to further cut production while the United States increases theirs. © StormPetrel1 – Flickr – C.C.
The coronavirus has created the conditions for renewed liberalization in the oil market. By sharply lowering demand through a drop in economic activity and transport, it has crystallized resentments and caused OPEC + to burst, which since 2016 has brought together the Organization of the Petroleum Exporting Countries (OPEC) and ten partner countries.
Russia fired the first, leaving the OPEC + meeting on March 6 in Vienna, without giving up on new production quotas. While Saudi Arabia proposed ambitious cuts to cope with the drop in demand caused by the Covid-19, Moscow refused this additional effort, saying that the United States should now participate in the reduction of supply. The Russian President, in making this decision, accedes to the insistent demands of the bosses of Russian companies, Rosneft in the lead, to end the Opep + agreement. Vladimir Putin did not digest the decision of his American counterpart Donald Trump to sanction the construction of the Nord Stream 2 gas pipeline. The United States said it wanted to limit European dependence on Russian gas, even though it largely exports its own gas to Europe, in the form of liquefied natural gas.
This failure to OPEC + immediately reduced oil prices by 30%. Since then, they have struggled to recover, and have even dragged stock exchanges around the world in their wake.