Brent crude tumbled to its lowest weekly close in four years at USS$26.98 per barrel as global demand shrinks from Covid-19 virus outbreak, U.S. may step in to manage the fallout of an oil price war between Saudi Arabia and Russia.
As governments around the world issue lockdowns to contain the spread and fuel consumption rapidly deteriorates, the market took some support from a Wall Street Journal (WSJ) report that the U.S. plans to pressure Russia and Saudi Arabia into cutting output to firm up oil prices and protect the US shale industry.
The WSJ story on March 19 citing sources said Texas regulators are debating on whether to cut back crude production for the first time in decades and that they were open to dialogue with the Organization of the Petroleum Exporting Countries (OPEC) as producers suffer from a historic crash in prices.
Administration officials are exploring a diplomatic push to get the Saudis to cut oil production and threats of sanctions on Russia aimed at stabilising prices, after U.S. oil companies pressed them to intercede, WSJ said, citing people familiar with the matter.
Trump said he would get involved at the appropriate time and that low gasoline prices were good for U.S. consumers even as they were hurting the industry.
A day later, Kremlin said Moscow does not need anyone else to intervene, as they have good relations with Saudi Arabia when it comes to oil markets.
Kremlin spokesman Dmitry Peskov said that low oil prices were unpleasant, but that Russia did not believe the current situation was a catastrophe. Moscow had sufficient state reserves to withstand the economic impact from weak commodity prices, he said.
Brent crude has dropped about 40 per cent in the past two weeks as the pandemic cut demand at the same time as a collapse of coordinated production cuts between OPEC and Russia to prop up oil prices.