The moment it looked like the novel coronavirus might take a hit out on the oil-sector, Russia broke its alliance with the OPEC community in order to create havoc among their long-time rivals – The North Americans. The three-year-long geopolitical effort that bound the biggest rivals to make sure the world got their share fair of oil collapsed after Russia broke out of its agreement.
Saudi Arabia took charge within a day as they quoted “To take care of the needs of the oil that the world might need.” The first step that they took was by decreasing their official selling price (OSP) for April in terms of all crude oil designations as the OPEC agreement went into a tailspin.
State-led oil production entity – Saudi Aramco offered a discount of $3.10 to the Oman/Dubai average which is down by over $6 a barrel since March, the company quoted in a statement. It further cut off April’s OSP of their Arab light crude oil at a discount offering of $3.75 per barrel versus ASCI, which was down from $7 barrel since March.
Aramco lowered their OSP for Arab Light crude oil to the section of Northwestern Europe to a discount of $10.25, which was a cut from $8 per barrel. A three-year pact ended between the OPEC and Russia into as relationships turned battered after Friday as Moscow refused to support deeper oil cuts to cope with the outbreak of coronavirus as the OPEC responded by removing all term limits on their own production.
Following a domino effect, oil prices in the region pummeled 10% as the analysts scoured evidence of a similar event of the 2014 price crash when Saudi Arabia and Russia went to war to gain market share for U.S shale oil producers.
Saudi Arabia, which is the de facto leader of the OPEC and the world’s biggest oil exporter by a severe margin is expected to fill in the power vacuum for the moment until a viable agreement is put in place.