Saudis step on everyone’s toes
First the coronavirus made US shale producers sneeze, then they got in an oil price war
If Covid-19 is a glimpse of a viral Armageddon, albeit one whose real contagion is global panic, then the oil price war is one of the four horsemen of the apocalypse.
It should not come as a surprise that Rosneft, the giant, mostly state-owned Russian oil company, is playing Russian roulette with Aramco, the giant, mostly state-owned Saudi Arabian oil company and its Opec handmaids.
It is about much more than a spat over a now failed agreement between the world’s two largest oil states to cut production.
This is a chance to unseat US shale oil producers who have helped to turn the US from being an oil importer into the world’s third-largest producer and have, perhaps, become a bit too big for their crude-stained boots.
It’s also a muscle-flexing exercise, a show of force to other oil states — like Iran, which along with the body blow from US sanctions is now reeling from its own Covid-19 outbreak. It shows who the big dogs are, and don’t you forget it.
The result of this strutting is the plunge in the price of benchmark Brent crude, which touched $31.02 a barrel on Monday, wiping billions off the value of the oil majors and sending shockwaves through the world economy.
Rosneft is sitting on a $170bn wealth fund, the Financial Times reports, which may partly explain the Russians’ current sang-froid.
Russian roulette is usually played with a revolver with one round in the cylinder. This week’s version is being played with an automatic pistol. No click-click. Just bang.