If Moscow and Washington strike a deal to boost the sinking oil markets, Saudi Arabia had better stay out of their way, according to analysts who spoke to RT.
The US and Russia agreed to engage in energy talks earlier this week, as both the global coronavirus crisis and the oil row between Russia and Saudi Arabia sent crude prices into a tailspin. International benchmark Brent and US West Texas Intermediate (WTI) crashed to 18-year lows on Monday, but they have slightly recovered since then with the news of a possible deal.
The prices could plunge lower if no agreement is reached, analysts have told RT. According to Lipow Oil Associates LLC President Andrew Lipow, WTI could sink below $15 a barrel, and Brent below $20 a barrel. While the market cannot be stabilized without new output cuts, crude is unlikely to fall much lower, argues David Madden, market analyst at CMC Markets.
There is a huge possibility that the two sides will finally sign an accord to support the energy market, the analysts believe. It is especially vital for the US to keep its shale industry afloat to preserve jobs.
“So there is a good chance of striking a deal with Russia as a way to stabilize the oil market and protecting the shale industry,” Madden said in a phone interview with RT, adding that the upcoming election puts added pressure on US President Donald Trump. “He will do whatever it takes to ensure that the US economy is in the best shape” it could possibly be.
If Moscow and Washington come to an agreement, the role of the Organization of the Petroleum Exporting Countries (OPEC) and its de facto leader, Saudi Arabia, would be in question. However, the kingdom is unlikely to do anything about it, as it could then face political consequences, Madden noted.
“I don’t think Saudi Arabia would want to go down the road of having a price war with Russia and the United States combined,” the market analyst said.
However, the current oil market crisis – with demand on the downward spiral and countries running out of storage space – could be solved only by a joint effort, Lipow argues, adding that any energy accord should include Saudi Arabia.
“The demand is so low that the OPEC and non-OPEC members might simply be forced to curtail production because there is no storage for the extra supplies,” he told RT. “Saudi Arabia simply could continue producing as much oil as they want. So it’s important that Saudi Arabia is included because it’s such a dominant player.”
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