Could oil go to $25 per barrel? Reuters reported this week that Russia’s central bank is not ruling out a plunge in oil prices next year because of weakening global economic growth, which lowers energy demand. Brent crude is down by almost a quarter since hitting $84 a barrel in October 2018.
However, this week brought talk of a renewed Saudi effort to raise prices. Crown Prince Mohammed bin Salman abruptly replaced energy minister Khalid al-Falih with royal half-brother Prince Abdulaziz bin Salman.
“Falih has paid the price for an oil price that remains stubbornly beneath the $70-$80 range” and Riyadh needs to bolster its budget, Derek Bower of RS Energy told the Financial Times. The flood of US shale oil has seen Riyadh and Moscow join forces to curb production and support prices, notes The Wall Street Journal. Yet this “Opec+” arrangement was built on the good relationship between Falih and his Russian counterpart. His replacement means more uncertainty about the way ahead.
The reality is that slumping global oil demand is largely outside the kingdom’s control, says Matt Egan for CNN Business. Falih’s replacement “reflects a sense of urgency about boosting prices”. Riyadh looks poised to double down on its strategy of limiting output by “considering even deeper production cuts”. As Michael Tran of RBC Capital Markets puts it, “The Saudis are in do-whatever-it-takes mode”.