Oil Prices Rise at Prospect of Deal Between Russia and Saudi Arabia
The price of oil has increased to over $30 per barrel following hopes for a truce in the price war between Russia and Saudi Arabia. US President Donald Trump, who has been acting as a mediator between the two countries, has suggested that the two countries cut output by 10-15 million barrels a day.
Oil prices had previously fallen to an eighteen-year low of $23 per barrel as the Riyadh and Moscow, fighting for a greater market share, were increasing production despite reductions in energy demand. The global pandemic is estimated to drive demand down by 30 barrels per day by the end of April.
Moscow had refused to take supply off the market, having reduced its output for a number of years while the Americans increased their market share. Riyadh had slashed prices on its crude oil and increased production to twelve million barrels a day.
Trump’s proposal is unprecedented and will require a coordinated effort from countries outside OPEC. Saudi Arabia has called for an emergency OPEC+ meeting whereas Trump is set to hold talks with US oil industry executives.
The Kremlin has poured cold water on prospects for a deal. Dmitri Peskov, the official spokesman for Russian President Vladimir Putin, has said that ‘no one has even started talking about any specific or even abstract deals’.
Some analysts have questioned whether the proposed reductions in demand will be enough to stabilise prices. Storage tanks are overflowing and producers may be forced to shut down projects relying on oil.