Tuesday, May 28, 2024

The biggest Oil Producer around the globe, Saudi Arabia started a price war in Oil Market. They announced that they would be aiming to maximize the production of crude oil which eventually led to crashing down of oil prices in the international market. In the last OPEC meeting Saudi Arabia along with Russia and other big nations gathered in Vienna in order to plan the production cost of crude oil to tackle the dropping prices due to the global outbreak of Coronavirus. That is when Moscow refused to accept the proposed cuts which led to huge decline in the prices. The cost of per barrel went down from $50 to $33 in the matter of days since the announcement. This war is going to have a huge impact on U.S Shale producers which gave a reason to Russia who also decided to participate in this clash and announced their aim to increase the production. This clash is expected to have maximum impact on Saudi Arabia and Russia, two biggest oil producers. Both of these countries’s national budget is massively dependent on oil trade and thus decreasing prices would affect their economy badly. Russia has $550 billion in their reserves that can help them cope up with the price of barrels between $25 and 30$ for nearly a decade. Russia’s Finance Ministry also announced withdrawal of $150 billion in order to cope up with decreasing prices. Russia would have to withdraw $20 billion every year to balance the budget. There are 2 clear aims for Saudi Arabia, first is to protect the market share and second to give a clear image of the King in oil business. This war is set to bring down the prices lower than the times of the 1991 Gulf war.


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