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