Russian President Vladimir Putin is targeting the U.S. oil industry by refusing to reduce oil output against the wishes of OPEC leaders as economic anxiety rises amid a global coronavirus outbreak, reports Bloomberg.
"The Kremlin has decided to sacrifice OPEC+ to stop U.S. shale producers and punish the U.S. for messing with Nord Stream 2," said Alexander Dynkin, president of the Institute of World Economy and International Relations in Moscow, a state-run think tank. "Of course, to upset Saudi Arabia could be a risky thing, but this is Russia’s strategy at the moment – flexible geometry of interests."
Oil prices plunged 30 percent in early trading Sunday after OPEC’s failure to strike a deal with its allies regarding production cuts, with some oil experts predicting $20 oil barrels in 2020.
"Huge geopolitical implications. Timely stimulus for net consumers. Catastrophic for failed/failing petro-kleptocracies Iraq, Iran, etc - may prove existential 1-2 punch when paired with COVID19," Ali Khedery, formerly Exxon’s senior Middle East adviser and now CEO of U.S.-based strategy firm Dragoman Ventures, wrote Sunday on Twitter.
The refusal by Russia to cut oil production was done to protect the Kremlin, George Friedman, chairman of Geopolitical Futures, told Newsweek.
"The Saudi recommendation for cutting production in order to increase prices is something Russia could do only if prices rapidly increase," Friedman said. "But given the downward pressure from the coronavirus, I think the Russians calculated that cutting prices wouldn't stabilize them and refused the Saudi request. It was not intended to hurt the U.S. but to try to protect the Russian economy."
Oil prices continued plunging Sunday amid worries the dispute will lead a virus-weakened economy to be awash in an oversupply of crude.
Brent crude, the international standard, lost $9.55, or 21.1%, to $35.72 per barrel, as of 7 p.m. Eastern time on Sunday after earlier touching its lowest price since early 2016. Benchmark U.S. crude fell $8.60 to $32.68.
The dramatic losses follow a 10.1% drop for U.S. oil on Friday, which was its biggest loss in more than five years. Prices were falling amid worries that producers won't cut supplies enough to match falling demand. The new coronavirus has hit travel and threatens to slow economies worldwide.
The Associated Press contributed to this report.
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