Oil drops further as Saudi-Russia output deal talks delayed

Oil drops further as Saudi-Russia output deal talks delayed
Russia and Saudi Arabia have been at loggerheads over output.
2 min read
06 April, 2020
Saudi Arabia and Russia appear ready for talks on oil production [Getty]
Oil prices tumbled further on Monday, as prospective talks between Russia and Saudi Arabia on production were delayed until later this week, as markets remained sceptical about any agreement being reached.

The two countries have been pitched in an output war, leading to a massive glut in oil supplies and no consensus on production.

Saudi Arabia and Russia were due to meet on Monday to discuss the issue of oversupply, but this has been pushed back until April 9, with fingers pointing at who was to blame for a breakdown in talks last month.

"[It] just took a delay in the meeting between Saudi [Arabia] and Russia to knock the wind out of that rally," Michael McCarthy, chief strategist at CMC Global Markets told Reuters.

It saw prices drop, including Brent crude down to $33.45 and West Texas Intermediate crude CLc1 to $27.36 a barrel.

US President Donald Trump has warned of imposing tariffs on oil imports, to protect the domestic industry, which have been hard hit by the low oil prices. 

Oil tankers and storage facilities across the world are said to be at full capacity due to the oil glut, and even a proposed cut of 10 million barrels per day is unlikely to have a major impact on prices, experts have said.

Despite the gloomy outlook for the oil industry, Kirill Dmitriev, chief executive of Russia's sovereign wealth fund, said that Moscow and Riyadh are "very, very close" to reaching a deal on output.

"I think the whole market understands that this deal is important and it will bring lots of stability, so much important stability to the market, and we are very close," he told CNBC.

Pressed further on the prospect of talks between the two countries later this week, he said: "Well actually look, a very positive message, I think they're very, very close."

"(Vladimir Putin) talked about how important this oil deal is, so Russia is committed."

Oil demand has also been hit hard by the outbreak of the coronavirus, which has seen around 2 billion people in lockdown to stop the spread of the disease.

The pandemic is likely to continue for several months and affect demand, experts say, due to continued lockdowns, public transport restrictions, and services being suspended.

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