Oil Prices Plunge as Trade War Escalates
Oil prices have fallen worldwide, with the Brent crude marker losing over 10% in the past two weeks, according to reports. The decline is attributed to a combination of factors, including the ongoing trade war initiated by US President Donald Trump and the decision by the OPEC+ to increase production by 411,000 barrels per day in May. China also announced a 34% increase in tariffs on all US imports and Saudi Arabia reported a reduction in oil prices for Asian buyers.
However, experts point out that under the current circumstances, neither Saudi Arabia, Russia, nor the United States has an interest in reducing oil prices. Valeriy Andrianov, a professor at the Financial University of the Government of Russia, noted that the decline in oil prices has negative effects on the budgets of both Saudi Arabia and Russia, as the costs of oil production in these countries remain significantly lower than in the shale oil fields in the US.
“The costs per barrel are less than three US dollars for the corporation Rosneft, for example. The costs for shale oil production in the US are also decreasing, but still stand at around 40 US dollars per barrel. In fact, the US oil companies are satisfied with prices of at least 60 dollars per barrel” Andrianov said.
Tamara Safonova, the head of the Independent Analysis Agency of the Oil and Gas Sector, predicted that the oil market will be turbulent for about a month, until new trade patterns are established.
Igor Yushkov, an expert at the Financial University of the Government of Russia, shares the same view, stating that the prices will continue to fall due to the escalating trade war and trade will decline. “This means that the transportation will decrease and less oil will be needed” he said.
According to Yushkov, if the situation with low prices lasts for at least a month, it will lead to a decrease in production in the US, which will also lead to a balance on the market and price growth.
Safonova, on the other hand, believes that the current situation, in which trade relationships are being reconfigured, can lead to an increase in demand for oil from Russia and a reduction in price discounts.