Plunging oil prices: bad timing?

Oil prices plunged by around 30 percent on Monday - the sharpest drop since 1991. In addition to the economic downturn caused by the coronavirus this was primarily the result of a dispute between Saudi Arabia and Russia, which were unable to agree on a reduction in production volumes at a meeting of the oil-producing countries (Opec+). Is a price war a good idea in these times of crisis?

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Wedomosti (RU) /

The virus wasn't factored into the calculations

The oil price war won't be over anytime soon, Anton Ussov, an expert on the oil and gas industry at management consultancy KPMG, comments in Vedemosti:

“The markets are in panic. On the oil market three specific factors are responsible for this: the lack of consensus on the long-term future of hydrocarbons as an energy source, the short-term drop in demand due to coronavirus and the failure of OPEC+. ... It seems clear to me that the negotiating strategies were drawn up without much understanding of the influence of the virus. In my opinion a war has broken out, but there will be no winners among the oil-producing countries. They will probably have to go back to the negotiating table and do everything possible to stabilise the market - although this will hardly succeed in the short term.”

Frankfurter Rundschau (DE) /

Saudis have had enough of Russia's solo act

With their drastic ultimatum the Saudis are trying to bring Russia, which has not observed the agreements, to heel, says Frankfurter Rundschau:

“For a long time the main antagonists Saudi Arabia and Russia pulled in more or less the same direction and stabilised oil prices by restricting production. The Saudis even cut back more than they had to. Russia, however, has recently pumped more than agreed on to the world market - President Vladimir Putin needs the money to pursue his ambitions as a major power. Now the Saudis have had enough. They are threatening to significantly increase the supply and have thus triggered the price crash. This also shows how fragile the business with the world's most important raw material has become. Demand will decline continuously in the coming years.”

La Tribune (FR) /

Putin doesn't care about the Saudis

Putin is using the plunging oil prices above all to hurt US shale oil production, which is likely to benefit from the coronavirus epidemic thanks to lower extraction costs, economist Michel Santi comments in La Tribune:

“Hard-working Russia can afford to do this because it has considerable reserves thanks to a well-stocked national fund, its oil and gas sales account for only 55 percent of its exports, and only a third of the country's budget is financed by oil and gas revenues. Of course, reasons of state and his country's interests take precedent for Putin, who (logically) doesn't care about the Saudi kingdom, which is completely dependent on its oil exports and for which an uncontrolled drop in oil prices poses an existential threat. ... The regional impact will inevitably be dramatic - all the more so because the Saudi reaction to the Russian manoeuvre is virtually suicidal.”

Neue Zürcher Zeitung (CH) /

Irresponsible behaviour is making the crisis worse

Against the backdrop of the coronavirus crisis the risky manoeuvring of the oil-producing countries leaves a bitter aftertaste, writes the Neue Zürcher Zeitung:

“The dispute between Saudi Arabia and Russia also highlight the pitiful state of global coordination. Both countries are members of the G20, the club of states that want to direct global affairs. But their behaviour is anything but responsible. Here, too, it's clear that it's not necessarily the virus that has the worst consequences, but the panic-stricken countermeasures.”