Oil Giants Saudi Arabia & Russia Battle for Market Dominance

With the oil industry being in constant turbulence, once again, the future of oil prices is now uncertain.

The recent fallout in relations between Russia and Saudi Arabia over curbing oil production has sparked an oil-price war, dropping US oil prices to a low $20/bbl price range. However, with talks of a cooperation between the two OPEC+ nations, hope for stability is in the air.

The spark: what started the oil price war?

One of the many consequences of the rampant spread of COVID-19 can be seen in the oil industry: for the first time in the last 10 years, the demand for oil has fallen. In reaction to this, the Saudi-led Organization of the Petroleum Exporting Countries (OPEC) proposed a plan to curb crude production to support the dropping prices. Up until now, Russia has worked with the oil cartel to support these price initiatives, but this time around they declined to approve OPEC’s proposal to cut production by an additional 1.5 million barrels per day. 

This was the spark that started the oil price war. In reaction to Russia’s decision, Saudi Arabia went against its initial proposal, ramping up production to drastically impact oil price. Now, both Saudi Arabia and Russia are flooding a market already drowning in oil.

Hope for an end

Oil prices have slowly been rising ahead of this Thursday, where Saudi Arabia and Russia are expected to cut a deal that would end this oil price war, notably, in curbing production. However, the extent of this proposed curb is yet to be known.

Although there is a great deal left uncertain, the mere prospects of collaboration between the two oil powerhouses has led to some positive developments. As of 18:15 pm CST, WTI crude was up 4.90% while Brent Crude rose by 3.08%. Speculation on the hopes for an output compromise between Saudi Arabia and Russia shows the desperate nature of the oil industry, which currently is on the brink of a recession.