Hey Saudi Arabia and Russia! Put Aside Oil Differences Or Its A Race To Zero

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The Energy Report

The Energy Report

 

The Phil Flynn Energy Report 

All Gassed Up With No place to Go

 

The good news is gasoline prices may be headed to all-time inflation-adjusted lows. The bad news is you might not have anywhere to go. Even with plunging crude prices, refiners can't make money as the coronavirus keeps people home from work and now closing restaurants. The historic plunge in gasoline demand may spread to coronavirus demand destruction pain to not only the producers of oil but those that refine it. While recession fears are rising as the coronavirus racks up more economic victims, it is clear that for the energy sector, we have never seen anything quite like this.

Now you might think in a time of crisis, rivals might put aside their differences for the good of the common cause. You might want to tell that to Saudi Arabia and Russia. Instead of trying to come back to the table to try to stabilize the market, they are continuing to fight.

 

The Saudis, for their part, are vowing to raise output to over 13 million barrels a day and are actively pursuing Russia's oil customers.

 

The Russians say they are also going to increase production and are prepared to compete with Saudi Arabia at any price. Now usually this would be great news for consuming countries. Still, with demand destruction fears and price uncertainty, the OPEC-Russia price war at this point seems to be doing more harm than good. The call by the OPEC "Joint Technical Committee" this morning is recommending an oil production cut of 1.5 million barrels through June but it is falling on deaf ears from the Saudis and the Russians.

 

Even Goldman Sachs cut its price forecast for Brent crude to just 20 a barrel for the second quarter.

 

Yet maybe the Russians want to talk. Reports say that Russia Energy Minister Alexander Novak is considering holding a video conference with the nation's oil companies to discuss production plans because of the volatility in the oil market. Maybe the Russians are going to blink. Bloomberg News reports that "The growing fear is that consumption, which averaged just over 100 million barrels a day in 2019, may contract by the most ever this year. That would quickly outstrip the loss of almost 1 million barrels a day in 2009 and even surpass the 2.65 million barrels registered in 1980 when the world economy crashed after the second oil crisis."

 

China to cut retail gasoline price by 1,015 yuan per ton and diesel price by 975 yuan per ton.

 

If St Patrick could chase all of the snakes out of Ireland, I am sure he can chase out the coronavirus! May the sunshine, all day long, everything go right, and nothing wrong. May those you love bring love back to you, and may all the wishes you wish come true. A St Patrick’s Day Blessing to all of you!  Happy St Patrick's Day!

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About the Author

Senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor.