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How a Saudi-Russian Standoff Sent Oil Markets Into a Frenzy How a Saudi-Russian Standoff Sent Oil Markets Into a Frenzy
(2 months later)
For the last three years, two factors have been hugely influential in the oil markets. The first has been the surge of shale oil production in the United States, which has turned the country from a large oil importer to an increasingly important exporter. The second is the alliance between Saudi Arabia and Russia, which recently have cooperated in trimming production to try to counter shale’s impact.For the last three years, two factors have been hugely influential in the oil markets. The first has been the surge of shale oil production in the United States, which has turned the country from a large oil importer to an increasingly important exporter. The second is the alliance between Saudi Arabia and Russia, which recently have cooperated in trimming production to try to counter shale’s impact.
Now that cooperation between two of the world’s three largest oil producers — the third is the United States — appears to be at an end. Saudi Arabia, as the dominant member of the Organization of the Petroleum Exporting Countries, last week proposed production cuts to offset the collapse in demand from the spreading coronavirus outbreak. Russia, which is not an OPEC member, refused to go along. And the impasse has turned into open hostilities.Now that cooperation between two of the world’s three largest oil producers — the third is the United States — appears to be at an end. Saudi Arabia, as the dominant member of the Organization of the Petroleum Exporting Countries, last week proposed production cuts to offset the collapse in demand from the spreading coronavirus outbreak. Russia, which is not an OPEC member, refused to go along. And the impasse has turned into open hostilities.
After talks with OPEC members in Vienna, Russia’s energy minister, Alexander Novak, returned to Moscow for consultations on Thursday. In his absence, OPEC officials met and came up with what amounted to an ultimatum. The group as a whole would trim production by 1.5 million barrels a day, or about 1.5 percent of world supply. OPEC, meaning largely the Saudis, would make the bulk of the cutbacks, one million barrels, as long as Russia and other producers trimmed the rest.After talks with OPEC members in Vienna, Russia’s energy minister, Alexander Novak, returned to Moscow for consultations on Thursday. In his absence, OPEC officials met and came up with what amounted to an ultimatum. The group as a whole would trim production by 1.5 million barrels a day, or about 1.5 percent of world supply. OPEC, meaning largely the Saudis, would make the bulk of the cutbacks, one million barrels, as long as Russia and other producers trimmed the rest.
The gambit was “something of a boss move,” said Helima Croft, an analyst at RBC Capital Markets, but it backfired badly. Russia had played hard to get before, but this time Mr. Novak was not playing. The answer was “no” again, and the Saudi oil minister, Prince Abdulaziz bin Salman, and other officials headed back to their hotels with no results and no communiqué.The gambit was “something of a boss move,” said Helima Croft, an analyst at RBC Capital Markets, but it backfired badly. Russia had played hard to get before, but this time Mr. Novak was not playing. The answer was “no” again, and the Saudi oil minister, Prince Abdulaziz bin Salman, and other officials headed back to their hotels with no results and no communiqué.
The standoff was ominous for the industry. Not only had OPEC and a wider group of producers — together known as OPEC plus — failed to agree on new cuts, but they had also failed to sign off on the extension of 2.1 million barrels a day in previous trims that would expire at the end of March. That created the danger of a tremendous flow of oil coming onto a market that was already hugely oversupplied and experiencing a steep slump in demand.The standoff was ominous for the industry. Not only had OPEC and a wider group of producers — together known as OPEC plus — failed to agree on new cuts, but they had also failed to sign off on the extension of 2.1 million barrels a day in previous trims that would expire at the end of March. That created the danger of a tremendous flow of oil coming onto a market that was already hugely oversupplied and experiencing a steep slump in demand.
“From April 1, neither we nor any OPEC or non-OPEC country is required to make output cuts,” Mr. Novak said after the meeting, according to Reuters.“From April 1, neither we nor any OPEC or non-OPEC country is required to make output cuts,” Mr. Novak said after the meeting, according to Reuters.
The Saudis struck back, notifying buyers on Saturday that they would offer deep discounts on their oil sales for April. The price cuts will probably be followed by other producers in the region, like the Saudi allies Kuwait and the United Arab Emirates. The intent, Saudi officials said, is to create more demand for their oil with lower prices.The Saudis struck back, notifying buyers on Saturday that they would offer deep discounts on their oil sales for April. The price cuts will probably be followed by other producers in the region, like the Saudi allies Kuwait and the United Arab Emirates. The intent, Saudi officials said, is to create more demand for their oil with lower prices.
The Saudis have been producing about 9.7 million barrels a day. The International Energy Agency, a Paris-based organization advising governments and industry, figures that the Saudis could produce more than two million additional barrels, while Kuwait, Iraq and the United Arab Emirates could add another million barrels a day.The Saudis have been producing about 9.7 million barrels a day. The International Energy Agency, a Paris-based organization advising governments and industry, figures that the Saudis could produce more than two million additional barrels, while Kuwait, Iraq and the United Arab Emirates could add another million barrels a day.
The market was spooked by this potential deluge of crude. At one point on Monday, prices were down by more than 30 percent. By afternoon, they had recovered to around $36 a barrel for Brent crude, the international benchmark, still a steep 21 percent drop.The market was spooked by this potential deluge of crude. At one point on Monday, prices were down by more than 30 percent. By afternoon, they had recovered to around $36 a barrel for Brent crude, the international benchmark, still a steep 21 percent drop.
“The market really was banking on this alliance between OPEC and Russia,” said Neil Beveridge, an analyst at Bernstein, a market research firm. With that relationship apparently sundered, “there is just no support,” he added.“The market really was banking on this alliance between OPEC and Russia,” said Neil Beveridge, an analyst at Bernstein, a market research firm. With that relationship apparently sundered, “there is just no support,” he added.
Despite having enormous oil reserves, Russia and the Saudi Arabia have rarely seen their way to cooperation. In his autobiography, “Out of the Desert,” Ali Naimi, the longtime Saudi oil minister, recounts that on the eve of what became a crucial OPEC meeting in November 2014, he met with Mr. Novak to ask for help in dealing with a growing oil glut. Joining in the talks was Igor Sechin, a close associate of President Vladimir V. Putin who is chief executive of Rosneft, Russia’s largest oil company.Despite having enormous oil reserves, Russia and the Saudi Arabia have rarely seen their way to cooperation. In his autobiography, “Out of the Desert,” Ali Naimi, the longtime Saudi oil minister, recounts that on the eve of what became a crucial OPEC meeting in November 2014, he met with Mr. Novak to ask for help in dealing with a growing oil glut. Joining in the talks was Igor Sechin, a close associate of President Vladimir V. Putin who is chief executive of Rosneft, Russia’s largest oil company.
The Russians refused to go along, Mr. Naimi says, and he packed up his papers and washed his hands of trying to stabilize the market through cuts.The Russians refused to go along, Mr. Naimi says, and he packed up his papers and washed his hands of trying to stabilize the market through cuts.
A price slide to below $30 a barrel focused minds, eventually persuading the Russians to join forces with the Saudis. A kind of bromance developed between Mr. Novak and Khalid al-Falih, who succeeded Mr. Naimi as Saudi oil minister in 2016. The two put on what seemed like natural displays of camaraderie at OPEC news conferences.A price slide to below $30 a barrel focused minds, eventually persuading the Russians to join forces with the Saudis. A kind of bromance developed between Mr. Novak and Khalid al-Falih, who succeeded Mr. Naimi as Saudi oil minister in 2016. The two put on what seemed like natural displays of camaraderie at OPEC news conferences.
Updated June 1, 2020
Exercise researchers and physicians have some blunt advice for those of us aiming to return to regular exercise now: Start slowly and then rev up your workouts, also slowly. American adults tended to be about 12 percent less active after the stay-at-home mandates began in March than they were in January. But there are steps you can take to ease your way back into regular exercise safely. First, “start at no more than 50 percent of the exercise you were doing before Covid,” says Dr. Monica Rho, the chief of musculoskeletal medicine at the Shirley Ryan AbilityLab in Chicago. Thread in some preparatory squats, too, she advises. “When you haven’t been exercising, you lose muscle mass.” Expect some muscle twinges after these preliminary, post-lockdown sessions, especially a day or two later. But sudden or increasing pain during exercise is a clarion call to stop and return home.
States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people.
Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.
Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.
If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)
More than 40 million people — the equivalent of 1 in 4 U.S. workers — have filed for unemployment benefits since the pandemic took hold. One in five who were working in February reported losing a job or being furloughed in March or the beginning of April, data from a Federal Reserve survey released on May 14 showed, and that pain was highly concentrated among low earners. Fully 39 percent of former workers living in a household earning $40,000 or less lost work, compared with 13 percent in those making more than $100,000, a Fed official said.
Yes, but make sure you keep six feet of distance between you and people who don’t live in your home. Even if you just hang out in a park, rather than go for a jog or a walk, getting some fresh air, and hopefully sunshine, is a good idea.
Taking one’s temperature to look for signs of fever is not as easy as it sounds, as “normal” temperature numbers can vary, but generally, keep an eye out for a temperature of 100.5 degrees Fahrenheit or higher. If you don’t have a thermometer (they can be pricey these days), there are other ways to figure out if you have a fever, or are at risk of Covid-19 complications.
The C.D.C. has recommended that all Americans wear cloth masks if they go out in public. This is a shift in federal guidance reflecting new concerns that the coronavirus is being spread by infected people who have no symptoms. Until now, the C.D.C., like the W.H.O., has advised that ordinary people don’t need to wear masks unless they are sick and coughing. Part of the reason was to preserve medical-grade masks for health care workers who desperately need them at a time when they are in continuously short supply. Masks don’t replace hand washing and social distancing.
If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.
If you’re sick and you think you’ve been exposed to the new coronavirus, the C.D.C. recommends that you call your healthcare provider and explain your symptoms and fears. They will decide if you need to be tested. Keep in mind that there’s a chance — because of a lack of testing kits or because you’re asymptomatic, for instance — you won’t be able to get tested.
Charity Navigator, which evaluates charities using a numbers-based system, has a running list of nonprofits working in communities affected by the outbreak. You can give blood through the American Red Cross, and World Central Kitchen has stepped in to distribute meals in major cities.
But there were tensions, and for at least a year the Russians hinted that they were tiring of the arrangement, which capped the growth of oil companies like Rosneft. As production from shale continued to rise, OPEC and its allies had to keep cutting.But there were tensions, and for at least a year the Russians hinted that they were tiring of the arrangement, which capped the growth of oil companies like Rosneft. As production from shale continued to rise, OPEC and its allies had to keep cutting.
“They could see an endless series of cuts going forward,” said Bhushan Bahree, a senior director at IHS Markit, a research firm. “They wanted to go back to growth rather than continue this arrangement with the Saudis.”“They could see an endless series of cuts going forward,” said Bhushan Bahree, a senior director at IHS Markit, a research firm. “They wanted to go back to growth rather than continue this arrangement with the Saudis.”
For their part, the Saudis absorbed most of the cuts to keep Russia on board, a situation that also stoked tension. In addition, Mr. Falih was fired last year by Crown Prince Mohammed bin Salman and replaced by the prince’s older half brother, Prince Abdulaziz, who is a veteran oil official but does not seem to have the warm relationship with Mr. Novak that Mr. Falih enjoyed.For their part, the Saudis absorbed most of the cuts to keep Russia on board, a situation that also stoked tension. In addition, Mr. Falih was fired last year by Crown Prince Mohammed bin Salman and replaced by the prince’s older half brother, Prince Abdulaziz, who is a veteran oil official but does not seem to have the warm relationship with Mr. Novak that Mr. Falih enjoyed.
In addition, power brokers like Mr. Sechin in Moscow appeared to be turning Mr. Putin against the Saudi deal. The Saudis have been pushing for cuts since at least early February as it became clear that the epidemic was going to hit demand hard. The Russians also argued in meetings that there was an opportunity to damage the shale industry in the United States, which had hurt both of the big producers. And Russia has built up a $570 billion fund that Moscow hopes will tide the country through an oil-revenue famine.In addition, power brokers like Mr. Sechin in Moscow appeared to be turning Mr. Putin against the Saudi deal. The Saudis have been pushing for cuts since at least early February as it became clear that the epidemic was going to hit demand hard. The Russians also argued in meetings that there was an opportunity to damage the shale industry in the United States, which had hurt both of the big producers. And Russia has built up a $570 billion fund that Moscow hopes will tide the country through an oil-revenue famine.
Russia may well damage the shale industry, but at great cost. The International Energy Agency forecast that shale output might decline in a $40-a-barrel environment. But a price war carries huge risks for the world, including depriving oil-producing countries of the wherewithal to finance social programs, including health care, at a time when they are threatened by the virus.Russia may well damage the shale industry, but at great cost. The International Energy Agency forecast that shale output might decline in a $40-a-barrel environment. But a price war carries huge risks for the world, including depriving oil-producing countries of the wherewithal to finance social programs, including health care, at a time when they are threatened by the virus.
“Playing Russian roulette in oil markets may have grave consequences,” said Fatih Birol, the agency’s executive director.“Playing Russian roulette in oil markets may have grave consequences,” said Fatih Birol, the agency’s executive director.