Question 2:

The following information is extracted from several articles

2

about

oil market

.

An intensifying oil price war between Saudi Arabia and Russia has created "very painful"

market conditions for the world's largest crude

oil

producers

.

International benchmark Brent

crude traded at $32.97 Thursday, down almost 8%, while U.S. West Texas Int

ermediate (WTI)

stood at $30.40, around 7.8% lower. Oil prices have almost halved since the start of the year.

Last week, Saudi Arabia failed to secure Moscow's support for deeper output cuts at a meeting

of the Organization of the Petroleum Exporting Cou

ntries and its allies, known as OPEC

plus.

OPEC had proposed to deepen cuts by 1.5 million barrels per day and Russia was asked to cut

an extra 300,000 bpd.

"T

here was no point in cutting until after everyone understood how sharply demand could fall.

We cannot fight a falling demand situation when there is no clarity about where the bottom (of

demand) is," Pavel Sorokin,

the

Russia's deputy energy minister

,

said.

"

It is very easy to get caught in a circle when, by cutting once, you get into an even

w

orse

situation: oil prices would shortly bounce back before falling again as demand continued to

fall."

C

ooperation between two

(Saudi Arabia and Russia)

of the world's three largest oil producers

the third is the United States

appears to be at an end

.

2

How a Saudi

-

Russian Standoff Sent Oil Markets Into a Frenzy. 9

th

March 2020. New York Times

Russia to OPEC

-

deeper oil cuts won't work. 12

th

March 2020. Reuter

The losers

and even bigger losers

of an oil price war between Saudi Arabia and Russia.

12

th

March 2020.

CNBC

a

)

With aid of diagram, explain how

the fall in crude oil demand affect the output of OPEC

plus

members

.

(1

0

marks)

b

) Discuss why Russia refuse to follow

Saudi Arabia

's proposal to cut crude oil production

w

ith aid of diagram

.

(

7

marks)

T

he End