Riyadh may have to start an oil price war again




The situation in the oil markets, despite the signs of a recovery in the global economy, appeared in late summer, mainly due to the second wave of the pandemic and related restrictions, with the day becoming more gloomy and alarming. The participants in the OPEC + agreement are, however, more optimistic about the increase in oil production, or pretend that so far everything is going according to plan.





Obviously, many oil-producing countries need production caps to offset the growth of other countries.

As for oil buyers, they are happy with everything. The main beneficiaries of low black gold prices are Asian importers, especially China and India, which have filled their storage facilities and tanks to capacity.

The difference from previous forecasts is now in the forecast for the third and fourth quarters of this year and in the first quarter of 2021, there is no sustainable growth in demand for oil and its products. The occupancy rate of oil and gas storage facilities is still very high and the markets are overflowing with oil and gas. It is not surprising that traders doubt the correctness of the May decision of OPEC + to increase oil production from January 1, 2021, by about 4 million b / d.

Now are the times for the main authors of the current period, OPEC + Russia, and Saudi Arabia. They, one might say, found themselves in a situation where their actions only make their situation worse. If oil markets do not recover quickly, the major oil-producing countries are clearly in danger of financial collapse. The current oil prices are too low for Saudi Arabia.

Saudi Arabia finds itself in a desperate situation. With low oil prices, Aramco suffers, and therefore the entire kingdom and government projects. The largest oil company has already been forced to suspend a number of major projects.

Riyadh is sucking money from its flagship, in which it owns 98% of the shares to finance the ambitious program to diversify the Saudi economy Saudi Vision 2030. What is even worth the decision to pay dividends at the end of the year in the amount of $75 billion!





A serious deterioration in the financial situation of Saudi Arabia is eloquently indicated, for example, by a noticeable decrease in investor interest in Saudi government bonds. If capital markets are really alarmed, then Riyadh will have very serious problems.

In such a situation, is it incredible that it will be possible to do without radical measures? Therefore, one should take seriously the harsh statements made recently by KSA Energy Minister Prince Abdulaziz bin Salman, and investors should prepare for aggressive actions by the unofficial OPEC leader aimed at increasing its share in the world oil market or changing oil prices.

Beneficial in the recent past, before the arrival of the pandemic, for Riyadh, the union is now close to collapse. This opportunity shows the possibility of a new price war, which will be the third in a row in the past six years. This is what they say, a statement that has been heard from Riyadh in recent weeks and that the “sole survivors” of the planet's “sole survivors” failures after the last week were predicted.





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TAGS: OIL PRICES, SAUDI ARABIA

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