Ryad (AFP)

Saudi Arabia may have won an all-out price war against Russia, but the world's largest crude oil exporter could now be accused of hastening the collapse of the sector.

Faced with a plummeting demand due to the Covid-19 pandemic and a supply that has become overabundant in the wake of the price war, the price of a barrel of American oil for delivery in May fell below zero on Monday. A first in history: the sellers resolved to pay to get rid of barrels, due to lack of storage.

For several weeks, prices have already been in free fall: in March, faced with the failure of negotiations on a drop in production to support prices between OPEC - Saudi Arabia in the lead - and its partners led by Russia, Ryad drastically lowered its prices, flooding the market with low-cost barrels.

In the process, the Saudi kingdom announced an increase in its production, benefiting from a very low extraction cost and financial reserves allowing it to resist a fall in prices.

Russia eventually returned to the negotiating table, and on April 12 an agreement was reached to cut nearly 10 million barrels a day in May and June.

But, coronavirus and recession on the horizon oblige, the prices did not go up.

"It cost two months of spectacularly low prices (...) but Arabia won the price war," said Cinzia Bianco, researcher at the European Council for International Relations. "But there is a high risk that this agreement is too weak and too late (...) Ryad could have released (on the markets) a beast that he is unable to control."

- "Destroyer" -

After the fall of the barrel in New York, American parliamentarians pointed the finger at the Saudi kingdom.

"This dramatic level shows that we cannot allow Saudi Arabia to flood the market, especially as our storage capacities are shrinking," said Republican Senator Kevin Cramer.

"The number of Saudi tankers heading to our shores is higher than ever. I call on President (Donald) Trump to prevent them from unloading in the United States."

Trump replied that he would consider the possibility of stopping their arrival.

Another Republican senator, James Inhofe, asked him that customs duties be imposed on Saudi oil but also on Russian oil "to punish their destructive behavior".

"It is clear that Saudis and Russians continue to flood the market in what I see as an effort to crush American producers," he wrote in a letter to Commerce Secretary Wilbur Ross.

High mining costs in the United States have caused the industry to be hit hard by the fall, with bankruptcy on the lookout for many companies, to the point that Trump asked his administration on Tuesday to put together a plan. emergency aid to the oil and gas industry.

- "Price to pay" -

Saudi Arabia has not responded to the accusations, stating only that it will monitor the markets closely and be prepared to take further action under the OPEC + -Organization of Petroleum Exporting Countries (OPEC) agreement. and its partners.

Several times in the past, the kingdom has ignored criticism from its rivals, who said they were threatened with bankruptcy by its policy, and affirmed that it would no longer play the role of market stabilizer by taking the brunt of the production cuts.

But Ryad did not emerge unscathed from this war and the fall in prices, just like its neighbors in the Gulf, whose public revenues depend for between 70 and 90% of oil.

In the long term, the decline could undermine the ambitious reform plan of Crown Prince Mohammed bin Salman, precisely intended to bring the kingdom out of its dependence on black gold.

Since the last drop in prices in 2014, Saudi Arabia's budget has been systematically in deficit, which has prompted the country to borrow more than $ 100 million and to draw on its financial reserves.

"Ryad may be satisfied now that he has demonstrated his determination, consolidated his market leadership (...) and made it clear to Moscow that in the future Russian oil policy should align with strategy Saudi, "says Cinzia Bianco.

"But the episode is not over and the risks remain high for Saudi Arabia. There could be a political price to pay."

© 2020 AFP