The two unlikely partners are now engaged in a price war
NO ONE KNEW exactly what deal would emerge from Vienna, but an accord seemed certain. After all, Saudi Arabia and Russia, two of the world’s oil superpowers, had worked together since 2016 to control output and support prices. With oil demand plunging because of the spread of covid-19, the partnership seemed more important than ever to all producers.
The meeting in Vienna of the so-called OPEC+ group was held amid much uncertainty over how long covid-19 would weigh on the global economy and on crude prices. Oil demand has fallen in only two of the past 35 years: 2008 and 2009, during the global financial crisis. China may be recovering from the outbreak—Citi, a bank, notes that traffic is picking up in most Chinese provinces, suggesting the resumption of normal life.
The Saudi-Russian partnership has been uncomfortable. Saudi Arabia had been a bitter rival of the Soviet Union during the cold war, and more recently was at odds with Russia over its involvement in the civil war in Syria on the side of President Bashar al-Assad and, in effect, of the pro-Iranian axis. Moreover, many in Russia disliked constraints on their energy policy.
In the most recent OPEC+ accord, in December, members agreed to curb output by 2.1m barrels a day to help offset rising production elsewhere. Such deals have supported the price of crude, but also ceded market share and propped up American shale. In 2018 America surpassed Saudi Arabia to become the world’s biggest oil producer.
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