He also made a big miscalculation. In early March, members of the Organization of the Petroleum Exporting Countries (OPEC), a cartel of 15 countries of oil-producing nations, met at OPEC’s headquarters in Vienna to discuss what to do as the disease’s impact has lowered global demand for oil.
Russia is not part of the bloc, but Russian officials were invited to the meeting. That’s because three years ago Russia made a deal to coordinate its production levels with the group, in a pact known as OPEC+.
At the meeting, Saudi Arabia, the cartel’s leader, suggested the participants collectively cut their oil production by about 1 million barrels per day, with Russia making the most dramatic cut of around 500,000 barrels a day.
Doing so would have kept oil prices higher, which would bring in more revenue for nations in the bloc whose economies are heavily dependent on crude exports. Saudi Arabia considered the move necessary because demand from Asia, which has been hit hard by the coronavirus, plummeted.
The Russians, long wary of such a move, opted against the plan. It’s still unclear exactly why, but some said Putin wanted prices to stay low to hurt the American shale oil industry or was gearing up to seize a bigger sliver of Asian and global oil demand for Russia.
Saudi Arabia didn’t take too kindly to the Kremlin’s decision and responded by slashing its export prices that weekend to start a price war with Russia. That brought the price per barrel down by about $11 to $35 a barrel — the biggest one-day drop since 1991.
As of April 6, oil stands around $30 a barrel, and that’s disastrous from Russia’s point of view. The country heavily depends on oil revenues to fill the government’s coffers. Without a large, reliable amount of money coming in, Putin will have fewer funds to spend on his nation, let alone deal with a growing health crisis at home......More
