Oil prices are likely to stabilize globally very soon, as Russia and Saudi Arabia are getting very close to finalizing an oil production cut deal. It was confirmed by the CEO of the Russian Direct Investment Fund Kirill Dmitriev.
After an oil production supremacy battle between Russia and Saudi Arabia for the past few weeks, glimmers of hope are showing up as Moscow and Riyadh are getting very close to an oil deal. A virtual meeting had been planned to take place on Monday, but CNBC reported the meeting will likely take place on Thursday.
According to the CEO of the Russian Direct Investment Fund Kirill Dmitriev, the two countries are very close to a deal on oil production cuts. He added:
“I think the whole market understands that this deal is important and it will bring lots of stability, and we are very close.”
His comments align with the comments of Russian President Putin made last week, who proposed a combined production cut of 10 million barrels per day. Putin emphasized the importance of the deal to the oil industry, hence the assurance from the Russian side.
In his statement, Putin also said that Russia is working closely with the United States to incorporate them into the oil production cut. This gives a rough estimate of the low oil demand globally as a result of the stay at home orders caused by the ongoing coronavirus crisis.
The oil prices fell to its lowest level in recent history, almost bringing the industry to its knees. To put it into perspective, at the beginning of March, the oil price was trading at around $60 per barrel, and as the month came to an end, it was trading to as low as $20 per barrel. Small output countries were the most hit as they could not keep up with the increase in oil production by the giant producers.
What’s Next for Oil Prices after a Possible Deal and during the Ongoing Coronavirus
The oil industry blames the coronavirus pandemic for the losses it has been counting since the first quarter. This is because, airlines have almost grounded all their international flights, except for the rescue repatriation flights. Besides, more people around the globe are getting to stay at home, either voluntarily or by authorities order.
In addition, as the number of infection rates increases by the day, stricter lockdown will come into play. These factors above together with more will only be a catalyst to the next downfall of the oil prices. However, the urgent production cut will greatly help in stabilizing the price in the near future if the infection rate of the virus is put under control globally.