Timeline of the Russia - Saudi Arabia Oil Price War
Thu, April 16, 2020
Russia and Saudi Arabia recently engaged in an oil price war that sent oil prices into freefall around the globe and heavily affected our oil and natural gas producers here in Texas.
So, how did we get to this point?
We’ve created a timeline below to help you better understand this complex situation:
Late 2000s/Early 2010s – U.S. Shale’s Growing Dominance
As modern hydraulic fracturing (fracking) became more common in the late-2000s, Texas oil production began to soar.
|In just the five years between 2009 and 2014, Texas annual oil production roughly tripled from nearly 400,000 barrels per day (b/d) to almost 1.2 million b/d.|
|Over this same period, U.S. oil production rose by over 60 percent, from about 5.4 million b/d to almost 8.9 million b/d.|
2014 – U.S Becomes Top Petroleum Producer
|Spurred by shale development, the United States overtook Russia and Saudi Arabia to become the world’s top petroleum producer in 2014.|
This put Russia and the members of the Organization of Petroleum Exporting Countries (OPEC), including Saudi Arabia, on notice that after decades of dominance, they were losing their grip on the global oil market. In an attempt to win back market share, OPEC flooded the market with oil, hoping the resulting lower prices would halt U.S. production. After a brief decline in prices, U.S. producers would emerge stronger than before.
2015 – U.S. Oil Hits the Global Market
U.S. oil production continued to grow, reaching over 9.4 million b/d. In December 2015, Congress repealed a 40-year-old ban on crude oil exports, adding another major source of oil supply to the global market.
|Increased access to the global market spurred additional oil production in the United States, particularly in regions such as the Permian Basin and the Eagle Ford Shale.|
2016 – OPEC + Russia Production Pact
|With U.S. shale thriving and adding to global supply, Russia and OPEC enter into a pact that would allow for the negotiation of production limits to help stabilize global oil prices.|
2018 – U.S. Reaches Top Global Oil Producer Status
With U.S. oil production continuing to climb – 18 percent in 2018 alone – the United States surpasses Saudi Arabia as the world’s top oil producer.
March 6, 2020 – Russia and OPEC Fail to Reach a Production Agreement
At the beginning of March, Russian officials met with OPEC in Austria to discuss production cuts in response to weakening demand for oil because of the growing concerns over COVID-19. These proposed production cuts were an attempt to stabilize global oil prices, as lower demand – particularly in China – was causing an increase in market supply, therefore lowering prices. Russia, however, did not agree to the proposed production cuts, sending the price of oil downward.
March 2020 – Saudi Arabia Floods Market and Slashes Prices as COVID-19 Impacts Worsen
After the failure to reach an agreement, Saudi Arabia said it would significantly boost its own oil output and reduce prices for its oil, dropping global prices even further. At the same time, the COVID-19 pandemic worsened, further weakening demand and driving prices lower.
April 3, 2020 – Trump Administration Calls on Saudi Arabia and Russia to Enact Production Cuts
Without an agreement from these countries to rein in oil output, prices remain low because of a growing supply glut and COVID-19 hurting demand worldwide. Russian President Vladimir Putin acknowledges the need for production cuts, calling on other countries to join.
April 12, 2020 - Russia and Saudi Arabia Come To A Deal
|After pressure from U.S. President Donald Trump and weeks of discussion for partnering countries, the largest state-owned oil producers around the world agreed to historic production cuts, accounting for nearly ten percent of the global supply.|