DUBAI/MOSCOW (Reuters) – Oil titans Russia and Saudi Arabia have accumulated vast financial cushions that will help them weather a lengthy price war. It’s a battle of nerves – so who will blink first?
FILE PHOTO: Members of media chat before the start of a press conference by Aramco at the Plaza Conference Center in Dhahran, Saudi Arabia November 3, 2019. REUTERS/Hamad I Mohammed/File Photo
Global oil prices crashed by a third after Riyadh discounted its crude and signalled it would raise output. Shares in national oil champions Saudi Aramco and Rosneft tanked.
The world’s top two oil exporters each have war chests of around $500 billion to weather economic shocks and are making bullish noises about their stamina as they square up.
Moscow said on Monday it could withstand oil prices of $25-$30 per barrel for 6-10 years. Riyadh, meanwhile, can afford oil at $30 a barrel, but would have to sell more crude to soften the hit to its revenue, according to sources familiar with the matter.
A war of attrition would nonetheless be damaging and force both countries to make difficult adjustments to their economies the longer it dragged on.
“As with any war this comes down to how much pain can be absorbed by each side,” said Hasnain Malik, head of equity strategy at Tellimer.
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