Will Russia be the new Sultan of Oil?

Well, it is common knowledge that the oil demand has been falling for the past few months and have seen a significant drop in the months of Feb-March. This was mostly an outcome of the ongoing coronavirus crisis. The falling demand has driven the WTI prices considered the benchmark for oil prices in the US, a little south of zero. The question here is when the global demand starts to reset which major oil producer will lead the market in the post corona world.

The facts of the case are simple:

• Russia and Saudi Arabia were in an ongoing price war which was a result of the fact that the former did not agree to cut production.
• Saudi Arabia which was earlier advocating production cuts to steer the prices upwards decided on 8th March that it was going to the reverse, ramping up production and facilitating a 65% quarterly drop-in prices.
• Complemented by the choking travel industry the WTI futures contracts prices for May have declined below zero. This is a direct result of the fact that suppliers are facing storage shortages and are desperate to sell their produce.
• The key feature of the global oil infrastructure is that Russia has transformed into an efficient producer due to America imposed sanction and can sustain prices as low as 40$ per Barrel.
• The other major players such as the US and OPEC members especially Saudi Arabia would suffocate if the prices were shy of 70-80$ per Barrel. This has created a golden opportunity for the Russian Federation to create a fresh construct and gain significant market share in the post COVID world.

This was my take on the crisis, and I tried to keep the explanation as simple as I could. The figures are well researched with relevant sources that I am happy to provide if need be. Lastly, this analysis is a personal opinion and could be similar to that of other individuals. Hope you enjoyed reading and have a better understanding of the situation.