Crude Oil Prices Close Mixed as US, Russia Mull Talks
By Adedapo Adesanya
Prices of major crude oil were mixed on Tuesday after Russia and the United States agreed to discuss the falling prices of the commodity at the global market as a result of coronavirus outbreak over three months ago.
As at the time of writing, Brent Crude was trading down by 38 cents or 1.44 percent to $26.04 per barrel, while the West Texas Intermediate (WTI) made a slight recovery, up by 21 cents or 1.05 percent to sell as $20.30 per barrel.
There were reports that Presidents Donald Trump of the US and Vladimir Putin of Russia agreed during a phone call to have their top energy officials discuss stabilizing oil markets since the COVID-19 outbreak and the Saudi-Russia oil price war since March 8.
The agreement sees an unexpected alliance since a failed deal earlier March between the Organization of the Petroleum Exporting Countries (OPEC) and Russia to cut production. This led the cartel’s de-facto leader, Saudi Arabia, to start a price war with Russia.
The price war has affected the US oil, which is is not a member of the previous alliance but still faces a threat to its own oil production as the world is facing an oil glut with no matching demand for crude.
The drop in US production comes as Saudi Arabia and Russia ramp up their output as the oil price war continues. Saudi Arabia in addition to boost production from April announced that it planned to boost its oil exports to 1.6 million barrels per day in May.
However, demand has plunged as more countries restrict movements amid the coronavirus pandemic. Air travel has also been grounded because of the outbreak. The continuous collapse in oil prices has been devastating for US shale producers and output.
The United States recently became the world’s largest oil and gas producer, thanks to a technology-driven shale drilling boom, but the current price of oil is below the production cost of many American driller and this is threatening the US shale industry.
To further mediate on the price war, the US government is also trying to persuade the world’s top oil exporter, Saudi Arabia, to cut crude output, and will soon send a special energy envoy, Mrs Victoria Coates, to the Kingdom.
In addition to oil and the pandemic, Mr Trump said Mr Putin and himself will talk about trade and sanctions the United States has imposed on Russia.
In 2019, the US placed sanctions on Russia’s Nord Stream 2 natural gas pipeline, halting work on the project weeks before it was expected to be finished. Russia said the pipeline will be completed eventually, but the delay could allow increased competition for gas markets in Europe, where the United States is eager to export more liquefied natural gas.