With the coronavirus already disrupting travel and energy needs worldwide, Saudi Arabia decided on Wednesday to double-down on its threat to flood the world’s markets with crude oil after its friendship with Russia collapsed over the past weekend.
While Saudi Aramco said it would boost capacity to an unprecedented 13 million barrels a day, Abu Dhabi’s oil and gas company ADNOC followed suit by saying it was boosting output by 25 percent to 4 million barrels per day.
Basically, the oil-rich states are declaring all-out war – flooding the market to dominate a greater share in retaliation for Russia refusing to go along with more production cuts. For the past three years, the global coalition known as OPEC has restricted crude output in an attempt to shore up prices against surging U.S. shale oil output.
This sticky situation actually has been directed by the Saudi Energy Ministry, while the kingdom’s energy policy is directed by Crown Prince Mohammed bin Salman and the country’s Energy Minister Prince Abdulaziz bin Salman – half-brothers and sons of the king.
The escalating crude oil war between Saudi Arabia and Russia comes at a bad time for the oil industry. The global spread of COVID-10 is destroying demand for fuel as air travel slumps and as efforts to contain the spread of the disease force businesses to close temporarily.
Even U.S. President Donald Trump has been drawn into the fracas. Trump spoke with Saudi Crown Prince Mohammed bin Salman by phone this week after the U.S. Department of Energy denounced “attempts by state actors to manipulate and shock oil markets.”
The price war pushed the price of crude down 25 percent on Monday, the sharpest decline seen since the 1991 Gulf War. On Wednesday, WTI crude was down to $33.40 per barrel while Brent crude was holding at $36.23 per barrel.
