At the OPEC summit last week, the Saudi crown prince called on Russia to reduce their production of oil as the global demand dipped due to the coronavirus pandemic.
Oil prices on Monday plunged by 24% which is the steepest drop since 1991.
With Russia refusing to cut production Saudi is set to increase its production to a record 13 million barrels per day in April.
The move by Saudi is set to further reduce the price of oil which will put great pressure on the U.S. oil industry.
Representative of the Oil industry have met with the U.S. administration suggesting that Washington should replenish the Strategic Petroleum Reserve which could help relieve pressure on the market.
This could be a wise move with prices now at $30 this week compared with $50 last week. The SPR has an authorised storage capacity of 713 million barrels which has been used in times of national emergencies such as hurricanes and wars.
Russia’s President Vladimir Putin has stated that the current oil price is sustainable for the Russian economy.
Some leading oil analysts have indicated that they expect the price could fall as low as $20 by the end of this year.
This will be very bad news for the US oil companies, but very good news for drivers with prices at US pumps set to fall below $2 per gallon, which will have a positive effect on the US economy as discretionary spending increasing.
Can Saudi Arabia survive the oil price war with Russia only time will tell, but it will have major implications for the global economy.