The price war between Saudi Arabia and Russia that saw U.S. oil prices sink to historic lows came to an end on April 12 as countries from around the globe continue to fight the COVID-19 outbreak and try to revive their economies amidst declining demands for energy. The deal restored the OPEC+ pact signed between Riyadh and Moscow in 2016 which collapsed in March when the two countries could not agree on production levels after the spread of the coronavirus cut global oil demand and slashed the price of crude.
Saudi Arabia had first attempted to decrease its already reduced production before flooding an already oversupplied market with crude. An agreement was reached to reduce output by 10 million barrels a day after a week of negotiations with the world’s major oil producers and the intervention of G-20 members including the United States.
However, it provided only a couple of days relief. Oil prices, particularly in the United States, plummeted to below zero dollars per barrel for the first time. Hundreds of U.S. oil companies now face the possibility of bankruptcy at a moment when the United States has become the largest oil producer in the world and is nearing energy self-sufficiency.
U.S. President Donald Trump praised the OPEC+ agreement, thanking Saudi Crown Prince Mohammed Bin Salman and Russian President Vladimir Putin for saving U.S. energy jobs and stabilizing the market, but crude oil continues to crash as companies await the OPEC+ output cuts starting May 1. The oil price crash drop also led to near-record drops in world stock markets.
A near term rebound in prices sufficient to save U.S. oil companies appears unlikely. If price does rebound, would they more likely enhance the market shares of Saudi Arabia and Russia in world energy markets rather than help U.S. companies? What does the great oil crash of 2020 mean for the U.S. oil industry? What challenges will U.S. producers confront in a different global energy market? How does the historic OPEC+ agreement shape the future of the triangular relationship between the U.S., Russia, and Saudi Arabia?
Professor Brenda Shaffer (moderator), Ambassador Michael Gfoeller, and David H. Rundell.