An analyst said on Wednesday that the oil price war could last until the end of the year. Coronavirus (COVID-19) pandemic, which has changed the entire global social-political and economic architecture has taken a toll on everything. Countries like Nigeria that depends solely on crude oil will also be the worst hit. Nigeria with all its natural endowment have suffered under successive bad leadership up till date.
As COVID-19 delivers untold hardship on both human lives and global economy, prices have plummeted more than 60 per cent since the beginning of year after OPEC+ failed to reach an agreement, leading Saudi Arabia and Russia to enter a price war amid the global COVID-19 pandemic crisis. For instance, Riyadh said it will boost output to 12.3 million barrels per day in April, while Moscow said it can increase production by 500,000 bpd in the long term meaning that the oil price war could last until the end of the year.
If Russia, a non-OPEC member, or countries in the cartel decide to call for some kind of production restraint, the oil market could go back to behaving the way it has for the past few years, analyst Edward Bell of Emirates NBD said. “You could see prices rallying on the back of … 5, 10 million bpd being cut, and those are the kind of scales of cuts that could be required, given the severity of the demand destruction that we’re seeing,” he said.
That, in turn, would also allow the United States of America shale patch to increase production again. However, Riyadh doesn’t seem prepared to back down from its price-war strategy, he said. “We don’t really see any change in the oil market diplomacy. If the kingdom wants to carve out its place as the global dominant oil supplier, it’s going to mean “a lot of pain” for marginal producers, he added. “It’s going to have to try and squeeze them out of the oil market as permanently as it can.”