Updated: Jun 8
The Kingdom of Saudi Arabia and Russian Federation have struck a deal to end their oil price war and cut production. The agreement, outlined in a statement released on April 9, will reduce crude oil production by ten million barrels-per-day, beginning on May 1 through June 30. Production would return to normal by April of 2022 depending on the level cooperation from Mexico and the United States, and progress in containing the COVID-19 pandemic. The agreement comes after the virus has resulted in a decrease of demand of nearly 35 million barrels-per-day, or 35% of the world's normal daily consumption, according to the American Petroleum Institute.
The 2020 Saudi-Russian Price War began on March 8, 2020. Due to a disagreement over production cuts in the midst of the COVID-19 pandemic, Saudi Arabia initiated
a price war with Russia, causing the price of oil to fall dramatically. This resulted in a serious loss of profits for both countries, as the Kingdom of Saudi Arabia and Russian Federation are reliant on cash from oil production to function.
Between both parties, it is believed the oil war hurt Saudi Arabia the most, as Crown Prince Mohammad bin Salman's Vision 2030 plan is heavily reliant on oil funds for investment. Vision 2030 is a ten year plan to reduce the Kingdoms reliance on oil, diversify its economy, and invest in its future through spending on public sectors such as health, infrastructure, and education.
The views expressed are those of the author and do not reflect the official policy or position of the United States Army, Department of Defense, or the United States Government.