Despite the ongoing coronavirus pandemic, which is adding immense pressure on the demand for oil globally, it seems that the main oil-producing countries care more about their issues with one another than they do about stabilizing the market.
After Russia, which is not an OPEC member, chose to disagree with OPEC’s latest decision to curb oil production even more due to the coronavirus, an outright price war began. Saudi Arabia, the unofficial leader of OPEC, was first to abandon nearly 4 years of production ceilings and flood the market with its oil, as did Russia. This is why oil futures dropped from around $55 dollars per barrel down to under $30.
Now, many investors have their eye on the United States. The US is known for producing oil at a lower cost than OPEC and Russia and was able to thrive when oil was near $50 per barrel, even as OPEC struggled.
But these new price minimums are a bit too much for the United States. American oil companies are revising their forecasts down and are likely to curb production. There were even rumors that the US and Saudi Arabia might finally reach a joint agreement to cut production and support oil prices.
Nevertheless, there has been no such agreement yet and oil prices continue to decline. The WTI dropped as low as $22.55, while the Brent crude reached $26.02 today.
If the US does not come to the negotiations table, it might hit Russia and Saudi Arabia with sanctions instead.
