US-Russia agreement diverting global oil diplomacy ... Will the price war subside?

The Kremlin said that US President Donald Trump and his Russian counterpart, Vladimir Putin, agreed by telephone on Monday to hold talks between the energy ministers of the two countries on the decline of global oil markets, and as a result of that, crude prices rose from the lowest level in 18 years.

The agreement marks a new shift in global oil diplomacy since the failure of the Organization of Petroleum Exporting Countries (OPEC) and Russia earlier this month to agree to cut production sparked a price war between Russia and Saudi Arabia, OPEC's leader effectively.

"Views were exchanged on the current state of the global oil markets, and it was agreed to hold Russian-American consultations on this through energy ministers," the Kremlin said in a briefing on the connection.

White House spokesman Jad Dair said the two presidents agreed on the importance of stabilizing global energy markets.

And the effects of the Corona pandemic also contributed to the fall in crude prices to a historical level, which threatens the higher-cost oil companies in the United States and around the world with bankruptcy.

US Department of Energy spokeswoman Shailene Haynes also said that Energy Secretary Dan Bruelet will speak with his Russian counterpart Alexander Novak about "ways in which the world's largest producers can deal with volatility in global oil markets".

The Kremlin did not say exactly what the two ministers would discuss, but Moscow has previously indicated that it would like more countries to join efforts to balance the world's oil markets.

Shortly before the phone call to his Russian counterpart, Trump said that Saudi Arabia and Russia had gone crazy in the oil price war.

Trump said in a televised meeting on Monday evening that he discussed with Putin the restoration of stability to the oil market, adding, "I did not expect to ever ask for an increase in oil prices ... the current price is very low."

Markets recover
As a result of these statements, oil prices recovered today, Tuesday, to rise in morning trading from the lowest level in 18 years, which was reached due to lower expectations of a new Corona virus epidemic of demand for fuel around the world.

Brent crude, the global benchmark, increased 1.3% to record $ 23.06 a barrel by 06:35 UTC, after recording at the close yesterday $ 22.76, the lowest level since November 2002.

US crude also rose 6% to $ 21.30 a barrel, after reaching the previous session $ 20.09 at the settlement, the lowest level since February 2002.

Oil markets faced simultaneous pressures from the outbreak of the epidemic and from a price war between Saudi Arabia and Russia after OPEC and other oil producing countries failed to agree to a further cut in production to support crude prices in early March.

Oil prices also found support from hopes that China's economic recovery will revive oil demand.

The oil refineries in the country began to increase the rates of processing crude to pre-crisis levels, but the increase may be in vain in light of the collapse of demand around the world.

Exhaustion of supply
For his part, Standard Chartered Bank expected that the average price of Brent will reach 23 dollars per barrel in the second quarter, and it expected an decrease in oil demand in April by 18.5 million barrels per day compared to 10.5 million barrels per day in previous forecasts, due to global public isolation measures Caused by the Corona virus.

The bank now also expects oil demand to drop in 2020 by a record average of 5.43 million bpd.

"The most stringent restrictions on movement within governments' response to the Corona virus have exacerbated our expectations for the shock of oil demand," bank analysts said in a note.

The bank also expects a surplus in the market of 21.8 million barrels per day in next April, 19.5 million barrels per day in May, and 13.7 million barrels per day in next June.