A three-year pact between OPEC and Russia ended in acrimony on Friday after Moscow refused to support deeper oil cuts to cope with the outbreak of coronavirus and OPEC responded by removing all limits on its own production, Reuters reports.
Oil prices plunged 10% as the development revived fears of a 2014 price crash, when Saudi Arabia and Russia fought for market share with U.S. shale oil producers, which have never participated in output limiting pacts.
Brent has lost about a third of its value this year, tumbling towards $45 a barrel, its lowest since 2017, putting oil-dependent nations and many oil firms under heavy strain as the global economy reels due to the virus outbreak, which has dampened business activity and stopped people travelling.
“From April 1 neither OPEC nor non-OPEC have restrictions,” Russian Energy Minister Alexander Novak told reporters after marathon talks at the OPEC headquarters in Vienna on Friday.
Saudi Energy Minister Prince Abdulaziz bin Salman told reporters when asked whether the kingdom had plans to increase production: “I will keep you wondering”.
The failure of talks may have more far reaching implications as OPEC’s de facto leader Saudi Arabia and Russia have used oil talks to build a broader political partnership in the last few years after effectively supporting opposite sides in the Syrian war.
“Russia’s refusal to support emergency supply cuts would effectively and fatally undermine OPEC+’s ability to play the role of oil price stabilising swing producer,” said Bob McNally, founder of Rapidan Energy Group.
“It will gravely rupture the budding Russian-Saudi financial and political rapprochement. The result will be higher oil price volatility and geopolitical volatility,” he said.