let's now begin an in-depth discussion
with experts from around the world
now all prices have fallen sharply for
four straight weeks now slumping by more
than 60 percent since the turn of 2020
as the corona virus pandemic continues
to severely disrupt business travel and
daily life demand recruit has been
plunging and major producers like Russia
and Saudi Arabia haven't held with the
situation by launching an intense price
war this is stirring even more
volatility in global stock markets as
the world economy reels from the corona
virus pandemic it's certainly a time of
uncertainty but to provide us with a
better sense of what might lie ahead
we're joined by dr. Kang woo head of
analytics Asia at SMP global plots and
Tony Nash CEO and founder of complete
intelligence let's first talk about the
losses we saw on Wall Street on Monday
oh that would be overnight here in East
Asia first of all dr. Eve starting with
you US stocks ended in the red again
after a even while the talk of a two
trillion dollar coronavirus support plan
it actually fell to pass the Senate for
the second time on Monday afternoon and
stocks have been extremely volatile in
recent weeks
despite the Fed having cut its interest
rates twice and ruling out other
never-seen-before measures so why have
these moves fail to reassure investors
and are you expecting markets to fall
even further this is a very volatile
time and overall the demand globally and
commodities on economy is is very weak
so it's a it's kind of panicking a panic
situation for many economies we is
really is up to the individual
governments to stimulate economy and
global organizations I do see that the
current and current downward pressure on
the economy and the commodity market it
will continue until we we have a
solution however you know the Indians of
of the US and other countries and the
fat could help a situation so investors
need more signs of reassurance from the
US government and possibly European
governments as well
well amid all this all prices have also
been getting battered day after day due
to lower demand and this all price war
between Saudi Arabia and Russia
so mr. Nash Moscow actually started this
price war by refusing to agree to cut
its oil production it does seem like a
rather risky game of chicken so what are
they actually aiming to gain from this
brinksmanship you know I think they're
just aiming for more say in the
trajectory for crude this is really a
capacity game Russia doesn't have the
additional capacity available really to
go to the map against Saudi Arabia Saudi
Arabia has a lot of capacity available
so if Saudi Arabia wants they can
continue producing more volume the
problem is neither government can afford
to produce at these rates they both for
their fiscal health not not the cost of
getting crude out of the ground but
actually their government fiscal health
they need crude prices about $20 higher
than they are right now so we don't see
this as viable for either government for
much longer
so you think both countries they might
not possibly be able to afford this war
basically in the long run well that's
room dr. e what about you you are
actually in charge of research at King
Abdullah Petroleum Studies and research
center in Riyadh what do you think MBS
is strategy is I agree that there is the
issue with with the physical budget for
without Arabia and similarly there is
the issue of the budget for for Russia
however in terms of the how long we can
sustain the current low prices is also
depends on how they are physical and
kind of the cash sort of reserves they
have Saudi Arabia oil is very important
it's a MBs
crown prince has been trying to very
hard to diversify the economy of Saudi
Arabia so currently the this the overall
oil market in in in turmoil in a way
that they have not very many strategies
of tool to pursue one is to preserve the
prices and the other one is to preserve
the market share or drive outed
competitors so it seemed that after
three and a half years of trying the
price defense now they are they are
turning to another strategy to drive out
the competition in our market so Saudi
Arabia trying to set yourself as the
market leader basically well with the
impact of cope with nineteen on markets
and economies around the world what they
just lurk around the corner if this all
parties will rages on for a prolonged
period of time
doctor we do you think it could possibly
be a potential nail in the coffin for
many all companies who are already
struggling to turn a profit one or was
$40 a barrel let alone $20 yeah indeed
many companies many players who will get
hurt other OPEC producers and exporters
a smaller ones other than Russia which
is an OPEC and and a Saudi Arabia they
get hurt and and globally u.s. u.s.
shield producers and Canadian heavy oil
sands project operators if the oil price
low oil price continues is once you know
the global the oil storage is running to
the limit then there's no choice some
some have to give up some have to reduce
the production and that will start from
there Franz you know the High Court
producers around the world rights and
the major producers do you need to come
together and agree to cut production
basically for it to stabilize but well
actually mr. Nash some say that's the
motivation behind this price war is to
hurt the US shale gas
juices do you agree with this view and
do you think it would actually work well
I think it might be I think when we saw
in 2015 we saw OPEC really take that
aggressive stance against shale
producers I think it failed because US
authorities tried to and very
effectively extended credit to shale
producers I think this time that those
same or even more aggressive instruments
will be put in place to defend shale
producers that's not to say everyone is
going to be healthy that's not to say
there won't be consolidation in shale
it's also not to say there won't be kind
of closed Downs in places that are
really expensive like Colorado and other
places to produce but I think in general
the aim is to ensure that the volume of
shale production in the u.s. stays
relatively consistent and that the US
continue can continue to be a net
producer of crude and I think that's
that's really what the u.s. is focused
on so I see this as a Saudi Russia issue
and perhaps a Saudi Iran issue as much
as it is a kind of Saudi Russia shale
issue well as an aftermath of this twice
for what do you think the lump long-term
impact would be on all markets on all
companies across the world well I think
crude companies have to become much more
efficient and this is really there's a
lot of automation there's a lot of other
things that can happen within oil
companies I think there's a difference
between national oil companies and
independent oil companies so the
national oil companies typically pretty
inefficient and they'll probably stay
that way the the independent oil
companies really the private sector ones
will have to get even more competitive
which there's plenty of room for them to
get competitive and I think they'll be
the healthier ones in the long run so in
the long run it could lead to more
streamline maintenance and higher
efficiency if all goes well I suppose
but dr. V well at the end of the month
the OPEX current production cut there
will be
expiring so after that what do you see
on the horizon do you see prices
dropping even further after that yes I
do I end of the month I do not see that
Russia and Saudi Arabia will come back
to the negotiation table very soon
eventually they might but not in a very
short time so April is probably the one
of the one of the pretty challenging
month for the oil market as the demand
continued to drop due to the pandemic of
the corona virus and oil production not
only the the price formulas by the Saudi
Arabia a physical supply of OPEC
particularly Saudi Arabia UAE will
increase that will put a lot of pressure
non-opec producers we which are more
dominated by by independent in in North
America of course also national
companies as well at the end of the day
the market it needs to be balanced so
that the way to balance you know the
buyer come Asian include Asia players
included can buy more oil but up to the
limit of the storage up to the limit of
the current estate of demand which is
very very weak so in that case at the
end of the day you know some some
production has to cut and have to come
from somewhere but April is very
challenging well what do you think mr.
Nash do you think there'll be another or
cut though it's possible you know what
what we're seeing is we think the last
half of April will actually see prices
return we'll see we think toward the end
of April we'll start to see prices back
in the 40s so things may get slightly
worse in the short term and anything is
possible but we you know with in the 40s
crude prices are depressed anyway we've
started to see Asia really come back
online post Kuroda and we'll see that
kind of move westward as well so that
consumption capacity as that comes back
online that will put pressure on prices
the
sure between the Saudi government and
the Russian government their fiscal
revenues there will be serious pressure
there and you can bet there's probably
pressure from the US government on the
Saudis and the Russians to resolve this
so I think that pressure will only
intensify over the next two weeks and
we'll see some resolution say mid Fabri
Thor mid April or a third week of April
something like that say you're well
expecting and hoping that this conflict
between Saudi Arabia and Russia will be
rather short-lived and seen them all
market will stabilize well that's all we
have time for I'm afraid but thank you
very much for joining the program today
dr. Kang
head of analytics Asia at S&P Global
Platts Antoni Nash CEO and founder of
complete Intelligence thank you this is
also where we end our show today but
we'll be back at the same time tomorrow
with more insights from global experts
until then have a lovely day or evening
wherever you are
goodbye
