In a crisis weeks in the making, the price of a barrel of Brent crude fell to lows last seen in 2002. With demand falling due to the global coronavirus pandemic, a dangerous dimension to the price stand off between Russia and Saudi Arabia was added to the mix. Believing themselves capable of taking the blow of reduced oil prices, Saudi Arabia turned their taps on fully, in order to pressure the Russians and the Americans. In what was described a game of chicken, Riyadh has been gambling that it can outlast the US shale sector, whose expensive production prices itself out of the oil market. The Saudi moves are aimed ultimately at pressuring Russia into implementing curbs on oil output, thereby controlling prices better. With both the Saudis and the Russias continuing with output full steam ahead, the grounding of flights and people working from home has meant that global oil stores are almost full to the brim. Until late this week, the price of oil and oil company shares were dropping to levels not seen for decades, due to the glut of supply. However, following Trump’s intervention on April 1, oil prices rallied upwards.
On Wednesday April 1, US President Donald Trump told a White House press conference, in reference to the impasse between Saudi Arabia and Russia, “I think that they will work it out over the next few days . . . Both know what they have to do.” However, the President did not reveal what made him so sure of an impending resolution to the stand-off. With the US shale sector on its knees and several shale producing companies on the brink of bankruptcy, Washington has increased its pressure on Riyadh. Regardless of what’s taking place in the background, on Thursday April 4, Brent prices showed signs of recovery. However, there remains a long way to go, as the world remains gripped by the coronavirus pandemic.