© 2020 Fortune Media IP Limited. Saudi Arabia needs to stabilize the oil market and faith in its own oil company or it will have a very disgruntled 20% of its population. Nearly every major economy in the world went into some form of shutdown. The Putin-Sechin bet was that Russia could take on Saudi Arabia and the U.S. oil industry, outlasting each with a combination of resources—Russia has amassed more than five hundred and sixty billion dollars in sovereign reserve funds—as well as fortitude, and plain-old chutzpah. S&P Index data is the property of Chicago Mercantile Exchange Inc. and its licensors.

© 2020 Forbes Media LLC. This week’s intensive oil diplomacy comes as coronavirus cases surge in Europe and the Americas, weighing on the outlook for demand over the next few months.

With a large Canadian investment and several new state laws designating pipelines as “critical infrastructure,” after a decade of protest, the project may be moving ahead—now that there is no one to stop it.

Trump said that the U.S. will lower production, even taking on some of Mexico’s obligations to limit oil output. The two commanders in this war—Putin and Saudi Crown Prince Mohammed bin Salman—are proud, impulsive men who pride themselves on toughness. U.S. shale production will come back on line.

Having dismissed the Saudis, Russia dispatched a message like this toward Washington: “Let’s be honest. Then, about two weeks ago, it all broke down. Over the next few days, crude prices fell 30%.

“Putin does not tolerate the language of ultimatums,” said Vladimir Milov, who formerly served as Russia’s deputy energy minister, and is now an opposition politician close to Alexey Navalny, the country’s main anti-Putin leader.

Many leaders in Moscow—especially Igor Sechin, a longtime Putin confidant and head of Rosneft, the state oil giant—were opposed to any cuts at all within the OPEC+ framework.

Lower prices offer big benefits for Russia.”. Finally, the trajectory of the pandemic, and the potential for a vaccine or treatment. The details of the agreement, however, reveal its dangers for Russia. For three years, Russia and other oil producers have been coordinating with OPEC to increase the strength of oil production cuts. After all, Sunday’s agreement aims to cut global production by ten per cent, but coronavirus-related shocks are expected to push demand down by thirty per cent. The country was in the middle of patchwork lockdowns, with each region nominally in charge of if and how to implement a quarantine. Now this is not an unwise move on its own. Furthermore, Saudi Arabia listed its oil company publicly in December and pushed citizens to buy. Adds quote from statement in third paragraph. Saudi Arabia then decided to cut the price at which it will sell oil to Asia and other markets, in a bid to increase its own sales and likely to punish Russia as well.

Oil prices are bouncing back as traders turn their attention to the upcoming virtual meeting between Saudi Arabia and Russia. Expert insights, analysis and smart data help you cut through the noise to spot trends, The Saudis’ likely message to the Russians: “The price is now lower for both of us, but we’re grabbing more market share. - All eyes are on Russia at the gathering of OPEC countries and their allies, with the cartel hoping to convince Moscow to back drastic production cuts to counter the effects of the coronavirus outbreak. Saudi Arabia’s mistake was presenting this tactic as a reaction to Russia, which is the primary reason the market saw the confluence of events as a disaster. All rights reserved. Brent crude has been been largely trading between $40 and $45 a barrel since July, capped by the impact of the coronavirus outbreak on global energy demand, and supported by the OPEC+ production cut. Oil markets ended up being pushed downward by two forces at once, each of which was larger than Russia had imagined: a supply shock made more dramatic by Saudi dumping, and a virus wreaking unprecedented economic havoc. The price of oil should not drop below about $25 per barrel in the interim. Perhaps Russia can take consolation in the fact that quite soon the entire notion of a cartel may be outmoded. His shift in mood was matched by an increasing urgency from bin Salman and Trump, whose economies were also suffering. Putin faced another pressure: COVID-19 cases were rising exponentially in Russia, topping more than twenty thousand. Sechin picked the right moment to make his argument again to Putin, bringing him a personal letter—a copy of which was obtained by Reuters—in which he argued that the OPEC+ deal gave a “preferential advantage” to the United States and thus posed a “strategic threat” to Russia. “They are forced to choose between quarantine and the economy,” Milov said. -Putin’s most important project at the moment is preparing the ground to make himself Russia’s leader for the indefinite future. Will we be able to go skiing this winter? FORTUNE may receive compensation for some links to products and services on this website.

The other problem with Saudi Arabia presenting its tactic as a reaction to Russia is that it sets them up as opponents, and Russia will almost definitely come out looking like the winner. MOSCOW, RUSSIA - MARCH,6 (RUSSIA OUT) Russian President Vladimir Putin speeches during the meeting ... [+] with leaders of parliamentary parties, at the Kremlin, in Moscow, Russia, early March,6,2020. And though he’s so far managed those rainy-day funds with great care, Putin knows we now live in a world where a storm is raging. The oil collapse this week is the result of two powerful oil producers reacting in their own best interests during a global demand crisis. “As I imagine it playing out, the Saudis tried to pressure us, and Putin told them to go to hell.”. The next pandemic: where is it coming from and how do we stop it? — With assistance by Dina Khrennikova, and Olga Tanas, Russian President Vladimir Putin (L) meets with Saudi Arabia's Crown Prince Mohammed bin Salman in Riyadh, Saudi Arabia, on October 14, 2019. The Saudis, in response to slowing demand for oil, wanted to cut production further to keep prices stable. News also came that Saudi Arabia would increase its own oil production in April to at least 10 million barrels per day, which is high, but still within its OPEC quota. Last week, in the midst of the oil demand drop caused by Coronavirus, Russia finally vetoed an OPEC plan. Saudi Arabia then decided to cut the price at which it will sell oil to Asia and other markets, in a bid to increase its own sales and likely to punish Russia as well. Our economy is much less dependent on oil exports than yours, and our rainy-day funds are much deeper. “Both sides reiterated their readiness for further close coordination in this area in the interest of maintaining stability in the world energy market,” the Kremlin said.

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