After Record Rally, Oil Faces Collapse As New Feud Erupts Between Saudis And Russia; Monday OPEC+ Meeting Cancelled

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Originally appeared at ZeroHedge

In retrospect, trading on a Trump tweet may not have been the best idea.

On April 2, in what initially appeared to be a belated April fool’s joke, the US president tweeted “Just spoke to my friend MBS (Crown Prince) of Saudi Arabia, who spoke with President Putin of Russia, & I expect & hope that they will be cutting back approximately 10 Million Barrels, and maybe substantially more which, if it happens, will be GREAT for the oil & gas industry!”

What followed was the biggest rally in the price of oil ever, as countless oil shorts scrambled to cover their positions amid concerns there could be even a shred of truth to Trump’s boast that the oil price war between Saudi Arabia and Russia could be coming to an end, especially since global oil demand had cratered by over 20% just as Saudi Arabia boosted its own output to a record 12mmb/d

After Record Rally, Oil Faces Collapse As New Feud Erupts Between Saudis And Russia; Monday OPEC+ Meeting Cancelled

One day later, on Friday, the surge continued after R-OPEC members saying they may indeed consider a 10mmb/d cut (which, as we also explained would not be nearly enough to balance the oil market but at least it was a start), with Putin admitting he had spoken with US President Trump saying “we are all worried about the situation” and that he is “ready to act with the US on oil markets” with 10mmb/d in oil production needed to be cut.

However, as his Russian energy minister, Alexander Novak, explained at the same time, any production cut would need to also include US shale producers , something that Trump was certainly not too keen on. As the WSJ reported, “Saudi Arabia and Russia won’t cut unless they get signals from U.S. producers they will reduce output, the officials said. But they added that official joint curbs would be more difficult to enact in the U.S. because of antitrust laws.”

And so, the world was excitedly looking forward to the Monday’s virtual R-OPEC conference where the question was whether Trump would agree to cut US production (and whether he even had the authority to enforce such a cut)

But before that, something happened that few noticed yet ended up being a gamechanger: among the other things Putin said on Friday, we reported that the Russian president was also kind enough to summarize the reasons for the oil price collapse which he blamed on the coronavirus, the lack of oil demand and, drumroll, the Saudi withdrawal from the OPEC+ deal.

“It was the pullout by our partners from Saudi Arabia from the OPEC+ deal, their increase in production and their announcement that they were even ready to give discounts on oil” that contributed to the crash, along with the coronavirus-driven drop in demand, he said.

“This was apparently linked to efforts by our partners from Saudi Arabia to eliminate competitors who produce so-called shale oil,” Putin continued. “To do that, the price needs to be below $40 a barrel. And they succeeded in that. But we don’t need that, we never set such a goal.”

As it turns out, Saudi Arabia was – and remains – quite sensitive to accusations over who was responsible for the failure of the March 5 Vienna summit which ended up in Russia refusing to be forced into even bigger production to appease Saudi Arabia, and prompted Saudi Arabia to unleash a historic oil glut.

In a statement early on Saturday, the Saudi Foreign Minister Prince Faisal bin Farhan said the comments noted above by Putin laying blame on Riyadh for the end of the OPEC+ pact between the two countries in March were “fully devoid of truth.

“Russia was the one that refused the agreement” in early March, the Saudi foreign ministry said. “The kingdom and 22 other countries were trying to to persuade Russia to make further cuts and extend the agreement.”

Which just happens to be more fake news, and the reason why Russia balked is because it was faced with what it – correctly – viewed was a hostile ultimatum by OPEC. As the NYT reported:

After talks with OPEC members in Vienna, Russia’s energy minister, Alexander Novak, returned to Moscow for consultations on Thursday. In his absence, OPEC officials met and came up with what amounted to an ultimatum. The group as a whole would trim production by 1.5 million barrels a day, or about 1.5 percent of world supply. OPEC, meaning largely the Saudis, would make the bulk of the cutbacks, one million barrels, as long as Russia and other producers trimmed the rest.

The gambit was “something of a boss move,” said Helima Croft, an analyst at RBC Capital Markets, but it backfired badly. Russia had played hard to get before, but this time Mr. Novak was not playing. The answer was “no” again, and the Saudi oil minister, Prince Abdulaziz bin Salman, and other officials headed back to their hotels with no results and no communiqué.

Needless to say, Saudi Arabia was not used to getting no for an answer, and so it responded by effectively disbanding OPEC, even as it continued to blame Russia for doing so: as Bloomberg reports, “since the original OPEC+ deal fell apart at a March 5 meeting in Vienna, the Saudis have argued Russia decided to walk away and was first to say countries were free to pump as much as possible.”

“The Russian Minister of Energy was first to declare to the media that all the participating countries are absolved of their commitments,” said Prince Abdulaziz, the energy minister and half-brother of Crown Prince Mohamed bin Salman. “This led to the decision by countries to raise their production in order to offset lower prices and compensate for their loss of returns.”

In any case, Saturday’s direct criticism of Putin was echoed in a statement by Energy Minister Prince Abdulaziz bin Salman, and threatened any fleeting hope of an agreement to stabilize the collapsing oil market after President Trump devoted hours of telephone diplomacy last week to brokering a truce in the month-long price war between Moscow and Riyadh.

As an immediate result, the OPEC+ (or R-OPEC) meeting scheduled for Monday has been delayed as Riyadh and Moscow have discovered a new reason to feud: arguing over who’s to blame for the collapse in oil prices.

After Record Rally, Oil Faces Collapse As New Feud Erupts Between Saudis And Russia; Monday OPEC+ Meeting Cancelled

And while the alliance is tentatively aiming to hold the virtual gathering on April 9 instead of Monday as it previously intended, a Bloomberg source said with another noting that “producers need more time for negotiations”; in other words, it is unclear if the meeting will take place at all now that the diplomatic spat has reached the highest levels of the world’s top oil producers.

And, as we discussed on Friday, beyond this latest diplomatic spat, Saudi Arabia and Russia have indicated they want other oil countries to join in any output cuts, complicating efforts to call a meeting, the delegate said, asking not to be named discussing diplomatic matters.

“We always remained skeptical about this wider deal as U.S. producers cannot be mandated to cut,” said Amrita Sen, chief oil analyst at consultant Energy Aspects Ltd. “If so, Russia doesn’t come to the table. And if everyone doesn’t cut, Saudi Arabia’s long held stance is that they will not cut either.”

A delay is “not a good sign,” said Ayham Kamel, head of Middle East and North Africa at the Eurasia Group consultancy. “This entirely plays negatively for the discussions.”

“Part of Putin’s comments are about saving face and also justifying why the oil price crashed and partly to deter criticism from the U.S. Putin doesn’t want to be blamed for any losses in the U.S. energy industry. It seems to me that there’s both a defensive effort to shield from criticism abroad for both the Saudis and the Russians,” Kamel said.

The prospect of a new deal spurred a 50% recovery in benchmark oil prices last week as traders saw some relief from the catastrophic oversupply caused by a lockdown of the world’s largest economies, in a bit to halt the coronavirus pandemic. With billions of people forced to stay at home, demand for gasoline, diesel and jet has collapsed by about as much 35 million barrels a day.

Which means that absent either Putin or MBS making some major concessions in what would be seen as a glaring sign of weakness, the record oil rally is about to go in reverse because the primary reason behind the oil price crash still looms: the world running out of oil storage in months if not weeks, and is why the Saudis, who have ramped up production to a record 12 million barrels a day in the past month and massively discounted the price of their oil, have insisted a new agreement must involve significant contributions from all OPEC+ nations and major producers outside the coalition, including the U.S. and Canada.

“No one had expected such a total collapse in the oil market,” said Fyodor Lukyanov, head of the Council on Foreign and Defense Policy, a research group which advises the Kremlin. “Saudi Arabia and Russia have lost control of the situation. Tearing up the OPEC+ deal caused a lot of hurt feelings in Moscow and Riyadh, for Putin and MBS. That makes things more difficult, they have to get over that while not losing face. That’s why they’re both pointing the finger at each other.”

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Hasbara Hunter

I fuckn love a game of Russian chess….

FlorianGeyer

I do too, HH. The Snakes and Ladders game preferred by the US is a game of chance.
Low oil prices only benefit consumers BUT when oil producing companies fail the supply is constrained and prices rise. Balance, as in everything is the key.

Whan the supply was increased by the boondoggle US Frackers the balance was weighted toward the La LaL Land US debt laden and Blue Sky fracking production.
Trump was determined to be No 1 oil exporter , even when the US taxpayer was underwriting the losses.

The US losses are now ‘too big to hide’ as the US slides further into an economic abyss. The virus chaos in the US is exposing the US for what it is. A Zio Mafia dictatorship that cares NOTHING about the general US population, especially those who cannot hope to afford the most expensive basic healthcare in the world.

Hasbara Hunter

I’m getting more & more enthousiast about this whole Corona-Crisis…it seems everything goes into overdrive..

FlorianGeyer

The US puppet government of Equador now has dead Corona bodies dumped on the streets because the government is overwhelmed. “RT News Saturday 4th April”.

Mass graves on the way I suspect.

The End Game will either be a Game of Thrones, or a Popular uprising where the current Western elite are evicted. A lot will depend on the Elite’s ability to get mercenaries to die for them ‘ again ‘.

Hasbara Hunter

I consider myself to be part of the “Resistance” simply because that’s in my genes…let them bring their Mercenaries to my peoples & I promise that I will take down as many as I possibly can…

FlorianGeyer

Timing of a counter plan against the globalists will be crucial, HH.

Hasbara Hunter

The Globalists want us to start so that they can blame the “Minority of Revolutionaries” have the Backing of’m Sheeples and can strike back hard…The Globalists need to start…Russia is doing exactly that…they wait & meanwhile do their thing…Fuckem Loudmouthed Chickenshit Coward Globalists…what are they goin’ to do? Nothing…

FlorianGeyer

Exactly, HH.

Patience demands that the right time to offer leadership is when the populace demands change.

The weight of globalist mistakes is compounded by their desire to control ALL wealth. When the globalists pluck too many feathers from the populace in order to comfort themselves, the seeds of rebellion are born.

S Melanson

Yes, overreach by the powerful becomes their downfall. The moment the elites come to the delusion they have vanquished all opposition in their path, that is the moment their fate is sealed.

The downfall of the Soviet Union was that magical moment when elites thought, incorrectly, nothing would or could stand in their way to total world domination through control of US power. Things started out well but growing arrogance and missteps by elite planners soon derailed their ‘perfect’ plans. They may blame Russia, but they have only themselves to blame through their arrogance and impossible demands – hence, once all opposition was swept aside (temporarily), elites failed to understand they still faced a foe they can never vanquish… themselves.

FlorianGeyer

The current US elite’s are starting to see that their Mafia Empire is being flushed away by their own greed and perversions.

Public flushing the toilet’s is now concentrating the Swamp. that will hopefully be pumped into deep mine workings, to be capped and forgotten for ever.

S Melanson

Very well said. Yes, let them come at you just like the Houthis let the Coalition rush on in to the waiting trap (repeatedly I might add).

In hand to hand combat we learn to use the momentum of the enemy against them which is particularly effective against big lumbering overconfident thugs that charge the ‘little’ guy. Hmmmm, big lumbering overconfident thugs… applies to a few nations and their cabal leadership… ;-)

So bring it on!

Jake321

LMFAO…the US going after the Netherlands? You truly are bonkers. But I guess you are playing it safe from your bug infested couch, Adolf.

Hasbara Hunter

Yes…the U.S. definitely might invade the Netherlands…be sure we are waitin’ for Y’all…it will be a very warm welcome…another Seal Team Six K.I.A? Little Asymmetrical Warfare? You folks are nothing but a KidKilling bunch of Psychopaths…bring it on & I will kill as many of your 7th Cavalry as I possibly can…

https://www.hrw.org/news/2002/08/03/us-hague-invasion-act-becomes-law

Bruno Giordano

Take it easy, Merijn. The (already small) chance of a Russian invasion is probably larger. Well, I am not sure what will happen when PutPut doesn’t like the verdict from the The Hague Court in the case of the murder of 298 innocent people.

Hasbara Hunter

First we’ll have to await the verdict…Innocent until proven Guilty…in the Dutch Zio-Media, Russia was already convicted before a trial even started…

Russians want to do business…an Eurasian alliance is much better in my opinion than the Alliance with Parasitic Psychopaths on the other side of the ocean…

Bruno Giordano

Yes, we’ll have to await the verdict. In the mean time they’ll continue their invasion by clumsy spies like those GRU amateurs that tried to hack into the OPCW network.

Hasbara Hunter

Holland is MASTERSPY…we have the best Systems for tapping, track & trace…helped China to develop the Social Credit System….facial recognition & all that…

Bruno Giordano

Yeah.. in other words it is a great small country. If I were you, Merijn, I would drop your plan to move to PutPut’s paradise

Hasbara Hunter

Holland always pretend to be small & modest…but they are not…we are Top-ZioNazis…check our Parliament & their Puppeticians…Geert Wilders is Über-ZioNazi…We have a long relationship with’m Jews…they have made us Rich….Slavetrades… V.O.C., W.I.C. they financed the whole Operation… Tulips from Turkey…the New York Stock Exchange (remember Manhattan) you name it…We are a lot Bigger than we pretend to be…

Remember Van Duyn:
https://www.bibliotecapleyades.net/bloodlines/duyn.htm

Hasbara Hunter

Why are Mark Rutte & Stef Blok not persecuted? They have sponsored Terrorist-Groups like al-CIAeda & ISIS with €80.000.000,- Dutch-Tax-Payers’ money Operation Gladio style…that is High Treason in my Vocabulary…Drag’m to Court & if found guilty…Firing Squad or Gallows…

Hasbara Hunter

Why are Mark Rutte & Stef Blok not persecuted? They have sponsored Terrorist-Groups like al-CIAeda & ISIS with €80.000.000,- Dutch-Tax-Payers’ money Operation Gladio style…noice Toyota Hiluxes, Nightvision-Goggles & other Big Boys Toys…which eventually caused more Death & Destruction than the Entire MH-17…Supporting Terrorists is High Treason in my Vocabulary… Drag’m to Court & if found guilty… Firing Squad or Gallows…

Jake321

LMFAO…guess you gave yourself totally away with that, kid…

Hasbara Hunter

Great ain’t it? Simple & Straightforward…

BMWA1

With any luck mercs will be same quality as those fighting Houthis.

Ilya

Someone said of the US ‘a hospital masquerading as a country’, but that is really giving hospitals a very bad name!

Jake321

LOL…more like a game of Russian Roulette by Putz Putin. I fuckn love that especially since he’s using a doubled barreled shotgun.

Pave Way IV

Summary:

Saudi Arabia chimps and US pimps rolled out their usual playbook of oil price manipulation – just like the good ol’ Petrodollar days when they, alone, could control prices and the rest of OPEC (mostly) obeyed. First, it’s cut production to jack up prices, now it’s flood the market with oil to kill shale oil (again).

Putin: “Screw that, OPEC+ Oil Mafia. Price manipulation always has blowback and the Petrodollar’s funeral was last month. Didn’t you get the memo? Russia is not afraid of competition producing oil. Let the market decide a reasonable price.”

Saudi Arabia and US: “WaaaAAAaaaa! It’s Russia’s fault that oil prices were too high… I mean… too low… because they won’t cut back on production… How can we control the price of oil if Russia won’t mob up with us? Why won’t they *obey* us? We’re the boss of the world!”

Putin: “FFS… What’s the point of even meeting with you mouth-breathers? You both seem… I don’t know… mildly retarded? I’m outta here…”

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Ray Douglas

I find myself disagreeing with the analysis presented. I have always held the view that both Russia and Saudi Arabia were attacking the US. For the writer to suggest that President Putin is ‘afraid’ of being blamed for the destruction of US shale is laughable. It is the US which is sanctioning Russia and trying to destroy the Russian state. Why would Russia be afraid of retaliating when being attacked.? The writer also fails to take into account the fact that the US is trying to destroy Saudi Arabia at the behest of Israel, which has been a long term plan drawn up by Rumsfeld and Cebrowski to finish off the plan starting with Afghanistan, Iraq, Iran, Libya, Sudan, Yemen, and finishing with Saudi Arabia and Turkey. The worlds biggest oil importer, China, now has direct pipelines from Russia and also gas pipelines. All part of the plan to take down the USA.

Hasbara Hunter

Them Russians are playing a smart game…Three Steps ahead…pretty inimitable at times…but doin’ an excellent job up till now…

Assad must stay

right so what should russia do right now to win and defeat us/saudis?

Pave Way IV

Hmmm…. Sit back and watch the conjoined twin cannibals chew on each other until the weaker one (Saudi Arabia) dies? Then the U.S. can drag the Saudi corpse around with us and pretend we don’t notice IT’S DEAD. Russia only needs to practice social distancing from the U.S. and wash their hands frequently if they have to touch anything the U.S. might have touched.

Then there’s the ensuing collapse of the USD and hyperinflation we can’t print away. I’m sure the New York Fed’s new ‘Investment Manager’ in charge of the debt buyout program – (((BlackRock))) will do what’s in the best interest of U.S. citizens. At least until the f’king food riots start,and CNN RT has vids of politicians and BlackRock execs hanging upside-down from gas station roofs a la Mussolini.

Russia doesn’t have to do a damn thing – we (the US) dug our own grave. Best for Putin to keep the nuclear codes handy. You know how f’king crazy a mortally wounded animal can get.

Jake321

Well, I know how f’king crazy you are. And that’s bad enough.

Ray Douglas

The empire is the boss. That is the entity which needs to be taken down, not Saudi. If you remember a couple of years ago the Saudi King visited Moscow where private secret talks were held with just four people in the room. President Putin and his interpreter, King Al Saud and his interpreter. My own opinion is that MBS doesn’t know what is going on. I think that whatever plan was concocted between the two principles is being enacted so as to remove blame from Saudi Arabia. After all Saudi is occupied by the US and Saudi is surrounded by US missiles and troops. It is much easier for Russia to take the blame as there is less chance of US attacking and occupying Russia. When you understand that the US has plans to destroy Saudi and break it up into different ‘parts’ then you can see the plan. I think that Russian intelligence were the ones to let the Saudis know and also the Turks as they are also included in US plans to destroy and Balkanise. The fly in the ointment for the US is Russia and China.

Assad must stay

i dont buy it, if US has plans to destroy saudi why hasnt it done it by now? and if saudis know this why they are continuing to do things with them?

RussG553

What good will a reduction of 1.5% of world production be anyway? Even when things get back to the new “normal”, 98.5% of pre-covid production will still be a vast oversupply.

Ilya

Erm, just when David has the slingshot aimed on Goliath’s ankles, Putin chooses Christian forgiveness.. I can’t blame him, but to ask reform of a known psychopath, is a bit Jeremy/Bernie. Some humans/nations are up to reform, some are not.

Shaytan-e Bozorg, right now, needs a lesson in kamma(action)-vipaka(result of action). It is a harsh, self inflicted lesson, but only this will do.

BMWA1

Don’t worry Ksa will preclude any rational solution as they are not rational. Pipeline oil customers in eastern Europe and China will remain Russian….it is a problem for Ksa to maintain so much oil in tankers when demand is low…this will weaken their hand also (vipaka). Putin is probably motivated to increase social payments with crisis…not by oil war. Ksa simply doesn’t care.

John

I liked the article. My only beef with it is that it goes along the same path of putting too much reliance on personality. I guess many heads of state and businesses do have that element. However, if one person in the game does not, it is President Putin and it also goes for his circle. They don’t play for emotion and ego, they play for keeps. It is the historical record, starting with the day the Russian paratroopers rolled into Pristina Airport ……. uninvited. My take all

Jake321

Oil price goes bye bye. Islamist Iran goes bye bye, Want-to-be Socialist Venezuela goes bye bye, Putz Putin’s RF goes bye bye. It’s a beautiful day in the neighborhood. Enjoy!

Ashok Varma

Russia is the strongest in this contest of wills and should destroy US and Saudi economies.

verner

sort of typical – dunny the dunce implores saudi and russia to cut production to reach a semblance of balance in the market without the shale production being included. shale requires full tilt output and with prices where they are, a reduced output won’t be enough to service the debt and resultant bankruptcies across the shale acreage (and incidentally threatening wall streets future) would sit bad on dunny with the election coming up in about 7 months time. thus, dunny tries to railroad the saudis and the ruskies into submission while at the same time exempting the american shale production from participting.

of the world’s 100m barrels,opec stands for say 30, russia for 10 and the dysfunctional states of A another 10 to 12. the balance of 50m barrels are from independent countries who seem to be forgotten in the discussions.

is he seriously deluded – it seems to be the case.