The economic downturn reduced oil demand
Donald Trump’s announcement that the US government is considering imposing duties on imported oil has made a lot of noise. This statement was preceded by a message from CNBC. Because the coronavirus is damaging the world economy, Saudi Arabia and Russia will soon agree to reduce their oil production. But something went wrong.
The online conference of the major oil-producing nations scheduled for 6 April did not take place. But then the meeting was postponed. I wonder if anyone’s asked themselves why Saudi Arabia and Russia have to cut production to save the world oil market? Even though the US, the world’s largest oil producer, is not going to do so.
By protecting its shale industry, the US expects other countries to reduce their oil production. They don’t want to do it themselves. And, at their instigation, the media are already accusing Russia and Saudi Arabia of collusion. Supposedly, the conspiracy was to drive American shale oil out of the market. It is estimated that oil storage facilities around the world will become overcrowded at the end of April-mid-May. So one way or another, all oil producers will have to cut back on oil production. Against the backdrop of the international crisis, the results of the new OPEC oil deal are not very important. One thing is clear: America is unwilling to participate in slowing oil production.
By its stand, the US is openly demonstrating pressure on Russia and Saudi Arabia. This is being done in order for them to enter into a new agreement to limit their total oil production. Moreover, by accusing Russia and Saudi Arabia of collusion, and by taking a tough stance of refusing to limit domestic production, the US is reducing Russia’s and Saudi Arabia’s interest in reducing production. Trump therefore supported the proposal of American trading oil companies to impose duties on imported oil. He decided that the sanctions previously imposed on China were effective. Therefore, imposing duties on imported oil in the US would force Russia and Saudi Arabia to take a decision to limit oil production.