Fueling Strategy: Please fuel as needed tonight, Friday we expect no change in pricing – Be Safe Today
NYMEX Crude $ 45.90 DN $.8800
NYMEX ULSD $1.4885 DN $.0447
NYMEX Gas $1.5218 DN $.0337
NEWS
OPEC ministers tried to force Russia to join them in production cuts, a high-stakes gamble that risks an oil price crash if it backfires. Cartel members told Russia that if it doesn’t join them in cutting production by another 1.5 million barrels a day to offset the economic impact of the coronavirus, then OPEC could abandon its cuts altogether. Hours later they raised the pressure on Moscow again, emerging from an informal meeting at the Saudi delegation’s hotel with a proposal to extend the curbs for even longer. Even as Secretary-General Mohammad Barkindo struck a conciliatory tone and praised Russia as a dependable ally, the oil market braced for more drama. Brent settled below $50 a barrel in London for the first time in nearly three years.
The standoff is unprecedented in the time since Saudi Arabia, Russia and more than 20 other nations created the OPEC+ alliance in 2016. It has underpinned prices and reshaped the geopolitics of the Middle East, but is now under significant strain. The risk for the Saudis is that if their gamble backfires they have more to lose — needing higher oil prices to fund their budget than Russia does. “OPEC is making the cuts conditional on Russia joining,” said Amrita Sen, chief oil analyst at consultant Energy Aspects Ltd. “Saudi Arabia may be ready to walk away if it doesn’t get a positive answer.”
Only in July, Russia and Saudi Arabia touted their alliance as a marriage to “eternity”. Fast forward less than a year, and the view among traders is that the couple may be on the verge of divorce. Still, it’s not the first fight between Moscow and Riyadh, and both sides have been able to find a satisfactory solution in the past. The Kremlin has gained a lot from its cooperation with OPEC. The country has been the biggest financial beneficiary of the cuts, largely because it’s borne a lesser share than Saudi Arabia. The alliance has also significantly enhanced President Vladimir Putin’s presence on the world stage and his political clout in the Middle East.
With oil prices down more than 20% since the start of the year as the economic impact of the coronavirus saps oil demand, the risks for the Friday meeting between OPEC and Russia are high. Not just for their alliance, but for the entire energy industry, from Exxon Mobil Corp. to smaller shale drillers in Texas, and oil-rich nations in Africa and Latin America.
Have a Great Day,
Loren R Bailey, President
Fuel Manager Services Inc.
Office: 479-846-2761
Cell: 479-790-5581