Just as the coronavirus outbreak wreaks havoc on the oil market, Russia has spotted an opportunity to hurt rivals in the US shale patch. Moscow’s partner’s in Opec now are collateral damage, and a price-sapping war for market share may follow. The three-year partnership that joined geopolitical rivals and halted the biggest crude price crash in a generation hit the buffers on Friday when Saudi Arabia-led Opec and Russia failed to agree on deeper production cuts in response to the spread of the coronavirus that has hit the global economy and its demand for oil.
Russia’s view that rival North American producers would gain most from new efforts to prop up prices killed the deal, said people familiar with the negotiations. Saudi Arabia, unwilling to take on more cuts without Russia as a partner, may also now be dragged into another stand-off with US shale.
Brent crude, down about 30 percent since January, slumped a further 9 per cent to $45 a barrel on Friday after Russian energy minister Alexander Novak said producers would soon be able to pump at will, ending three years of supply cuts designed to support prices. “Of course, if there is no agreement, Saudi Arabia will produce whatever the customer asks for,” said one Opec delegate. When asked if countries were entering into a fight over market share, he said: “It could be.” The impact on the oil price from the collapse of the Vienna negotiations could be severe, said analysts, with some predicting a drop to below $30 a barrel.