Question

Can you explain this in terms of economics?

DUBAI, March 7 (Reuters) - Saudi Arabia slashed its official selling price (OSP) for April for all its crude grades to all destinations, after OPEC's oil supply cut pact with Russia fell apart on Friday, sending oil into a tailspin.

State oil giant Saudi Aramco has set its Arab light crude oil to Asia for April at a discount of $3.10 to the Oman/Dubai average, down $6 a barrel from March, the company said in a statement late on Saturday.

It cut the April OSP of its Arab light crude oil to the United States to a discount of $3.75 per barrel versus ASCI, down $7 a barrel from March.

Aramco lowered its OSP for Arab light crude oil to Northwestern Europe to a discount of $10.25 per barrel to Ice Brent, down $8 a barrel.

A three-year pact between OPEC and Russia ended in acrimony on Friday after Moscow refused to support deeper oil cuts to cope with the outbreak of coronavirus and OPEC responded by removing all limits on its own production.

Oil prices plunged 10% as the development revived fears of a 2014 price crash, when Saudi Arabia and Russia fought for market share with U.S. shale oil producers, which have never participated in output-limiting pacts.

Saudi Arabia is the de facto leader of the Organization of the Petroleum Exporting Countries and the world's biggest oil exporter.

Q1 Why did the OPEC and Russia end their pact? Please explain

Q2 Why did the oil prices dip? Please explain.

Answer 1

Answer? Ficovom the given Jobomation we have, o why did the OPEC and Russia and their pact ? please Explain. The oil is an essential commodity to day and its output is- concentrated in the OPEC countries. ») OPEC is an Castel of oil producing and exporting camtriy and Saudi Arban in that cartel is the biggest oid Producer in the world. 2 list of the biggest Rusia and the U.s with its shale oil are also in the Oil Producers in the world. A couple of years back Saudi Arabia fearing a rising competition from the us shake oil companies decided to cut the Production. This has led to a record low price of oil to almost $25 Pea barrel. The cost of production for Shake oil is higher and that forced many shale oil producers to bank supty. → OPEC and other countries then agreed to beat the Production to support the prices. * A Recent out break of corona visus has very much aftecked the Economy negatively, B =) The falling oil demand means the OPECt needed to cut back Production to keep the Price higher. = trowever Russia refused to cut the Production bcz it through that output cut for the Country is for higher &>

- that could afted its Economy Russia has the oil as an impootant Source for revenue It we look at it politically then we can say that Russia was looking for the chance to oretaliate against the Us Sanctions. 1 Russia will $100 million ferday bez of the Price was but the move will hit hardee to the U-s shake oil Producers The shake oil output is rising and that could a threaten both the Saudi Arabia and Russia Russia has adopted the Scorched Earth Policy for retaliation. Oil Price have Pluged 30% in a single day bez of this deal collaps. @ Why did the oil prices dip? Please explain? * the oil Prices dipisas pea the deal, opec has asked the Peroduction Cut to limit the Supply and support the price in the world market. OPEC the Us and Russia were about to cut the Production by 7.5% of total Supply. However, Russia refuused to cut the Production citing it is too high and further declined to continue the agreed cut according to the deal which was about to laps in March. Aleeady dampening demand bezof the Corona vious threat means any increase in seepply will further Push the Porice lower.

* In gesponse, Saudi Arabia Cut its Selling Price and indicated - that it will raise its Poroduction to defend the market share. An increased global Supply means there will be a burther Poruce cut in the global market. The best * Dear student please obte *