The Eastern Mediterranean currently sits atop a veritable sea of potential. Energy discoveries in the past decade have transformed both economic and geopolitical perspectives of the region. With some experts making comparisons of the proven reserves ranging from the North Sea to Iraq, the region is widely regarded as a ‘next big thing.’ Large-scale projects and infrastructure agreements are already underway that will bring outside investment, needed financial windfalls, and rapid development.

Politically, partnerships have been established that foster needed intra-regional cooperation. Both Brussels and Capitol Hill have turned their eyes toward the Eastern Mediterranean. States from outside the region such as Quai d’Orsay and the U.S. State Department have sought to elevate engagement in the region. All this brings hope for the possibility of a bright and cooperative future for the Eastern Mediterranean.

However, the onset of hydrocarbon diplomacy in the Eastern Mediterranean is accompanied by a counterpart gunboat diplomacy. Firebrand rhetoric and tense foreign policy threatens to negate opportunities at hand. The region experiences increasing militarization as warships accompany drillships on exploration, or are sent from other countries, and alarming arms procurements and military exercises are conducted. Rivalry threatens to take away hard-won progress toward cooperation and instead manifest deadlock and contests in which there is no winner.

At the heart of these tensions is the ongoing dispute over regional maritime boundaries. Of the 13 maritime boundaries in the Eastern Mediterranean, 11 of them remain unresolved or disputed. Inclusive and equitable resolution of such disputes is of urgent importance if the Eastern Mediterranean is to successfully realize its projects, attract further investment, and formulate lasting ties that bind among neighbors.

Disagreements over maritime boundaries occur precisely because of the economic opportunities within the waters. Rather than using the potential windfalls as a launching point for closer ties, the region’s neighbors have felt undercut in the full extent of their Exclusive Economic Zone (EEZ) or excluded from consultation. This isn’t necessarily always due to coercive action from another state; the most internationally agreed-upon method for defining maritime boundaries and a country’s EEZ is in and of itself undefined, and always situational.

At the same time, one can only imagine the immense achievements that could follow boundary resolution in the Eastern Mediterranean. Delimitation would build upon the commendable efforts of actors inside and outside the region to use hydrocarbon discoveries as a launching point for reconciling political differences, and working together on deals that benefit all associated. Resolution would remove obstacles to windfalls so desperately needed in the region. It would empower the countries of the Eastern Mediterranean to take ownership in building a concrete framework for intra-regional development.

Without the stronger ties built by cooperation, the countries of the Eastern Mediterranean become sitting ducks to exogenous shocks, particularly given the ongoing COVID-19 crisis. Following the pandemic and its immense health concerns is a grim economic outlook that has world markets entering a recession and oil dropping to an 18-year low. Amid this, many members of the international community have drawn together to prevent the spread of the virus, provide medical assistance, and to persevere. The countries of the Eastern Mediterranean can learn their lesson from this exemplary leadership; the time to stop goofy behavior in the Eastern Mediterranean is now, before halted investment or receding prices cripple the markets.

Understanding the need in the region and the potential that awaits the precise resolution of equitable delimitations, how is that best achieved? Energy executive Roudi Baroudi offers up the United Nations Convention on the Law of the Seas (UNCLOS) as a pathway to this achievement in his expert commentary and seminal work, soon to be published by the Transatlantic Leadership Network and distributed by Brookings Institution Press.

Using precise satellite imagery produced by the maritime boundary software used by the UN and by international courts and tribunals, Baroudi makes the following contention: when followed with a by-the-book approach, inclusive of all associated actors, and gaining precedent from successfully-resolved maritime issues, UNCLOS can be an effective tool in reaching legal certainty and mutual agreement of boundary conflicts in the Eastern Mediterranean.

Whatever the solution may be, the independent international legal experts on maritime borders must be engaged through an equally independent and preferably US-based platform to address best ways to link the methods of delimiting contentious areas to achieve equitable outcomes that UNCLOS has not fully addressed, allowing judicial decisions on best methods available.

Exclusion, unilateral decision-making, and aggression will only maintain, if not intensify, the status quo.

Characterization of the Eastern Mediterranean must go beyond the dispute and conflict to include the opportunities awaiting it. Many actors are already beginning to do their part and must be celebrated for it. Coming to inclusive agreements on energy exploration holds immense potential for the region.

Jonathan Roberts is a researcher at the Transatlantic Leadership Network in Washington DC.Ambassador

John B. Craig is a senior fellow at the Transatlantic Leadership Network in Washington D.C., former Special Assistant to the President for Combatting Terrorism under Bush 43, and former United States Ambassador to Oman.

http://www.lebanongasandoil.com/index.php/news-details/196

The Eastern Mediterranean currently sits atop a veritable sea of potential. Energy discoveries in the past decade have transformed both economic and geopolitical perspectives of the region. With some experts making comparisons of the proven reserves ranging from the North Sea to Iraq, the region is widely regarded as a ‘next big thing.’ Large-scale projects and infrastructure agreements are already underway that will bring outside investment, needed financial windfalls, and rapid development.

Politically, partnerships have been established that foster needed intra-regional cooperation. Both Brussels and Capitol Hill have turned their eyes toward the Eastern Mediterranean. States from outside the region such as Quai d’Orsay and the U.S. State Department have sought to elevate engagement in the region. All this brings hope for the possibility of a bright and cooperative future for the Eastern Mediterranean.

However, the onset of hydrocarbon diplomacy in the Eastern Mediterranean is accompanied by a counterpart gunboat diplomacy. Firebrand rhetoric and tense foreign policy threatens to negate opportunities at hand. The region experiences increasing militarization as warships accompany drillships on exploration, or are sent from other countries, and alarming arms procurements and military exercises are conducted. Rivalry threatens to take away hard-won progress toward cooperation and instead manifest deadlock and contests in which there is no winner.

At the heart of these tensions is the ongoing dispute over regional maritime boundaries. Of the 13 maritime boundaries in the Eastern Mediterranean, 11 of them remain unresolved or disputed. Inclusive and equitable resolution of such disputes is of urgent importance if the Eastern Mediterranean is to successfully realize its projects, attract further investment, and formulate lasting ties that bind among neighbors.

Disagreements over maritime boundaries occur precisely because of the economic opportunities within the waters. Rather than using the potential windfalls as a launching point for closer ties, the region’s neighbors have felt undercut in the full extent of their Exclusive Economic Zone (EEZ) or excluded from consultation. This isn’t necessarily always due to coercive action from another state; the most internationally agreed-upon method for defining maritime boundaries and a country’s EEZ is in and of itself undefined, and always situational.

At the same time, one can only imagine the immense achievements that could follow boundary resolution in the Eastern Mediterranean. Delimitation would build upon the commendable efforts of actors inside and outside the region to use hydrocarbon discoveries as a launching point for reconciling political differences, and working together on deals that benefit all associated. Resolution would remove obstacles to windfalls so desperately needed in the region. It would empower the countries of the Eastern Mediterranean to take ownership in building a concrete framework for intra-regional development.

Without the stronger ties built by cooperation, the countries of the Eastern Mediterranean become sitting ducks to exogenous shocks, particularly given the ongoing COVID-19 crisis. Following the pandemic and its immense health concerns is a grim economic outlook that has world markets entering a recession and oil dropping to an 18-year low. Amid this, many members of the international community have drawn together to prevent the spread of the virus, provide medical assistance, and to persevere. The countries of the Eastern Mediterranean can learn their lesson from this exemplary leadership; the time to stop goofy behavior in the Eastern Mediterranean is now, before halted investment or receding prices cripple the markets.

Understanding the need in the region and the potential that awaits the precise resolution of equitable delimitations, how is that best achieved? Energy executive Roudi Baroudi offers up the United Nations Convention on the Law of the Seas (UNCLOS) as a pathway to this achievement in his expert commentary and seminal work, soon to be published by the Transatlantic Leadership Network and distributed by Brookings Institution Press.

Using precise satellite imagery produced by the maritime boundary software used by the UN and by international courts and tribunals, Baroudi makes the following contention: when followed with a by-the-book approach, inclusive of all associated actors, and gaining precedent from successfully-resolved maritime issues, UNCLOS can be an effective tool in reaching legal certainty and mutual agreement of boundary conflicts in the Eastern Mediterranean.

Whatever the solution may be, the independent international legal experts on maritime borders must be engaged through an equally independent and preferably US-based platform to address best ways to link the methods of delimiting contentious areas to achieve equitable outcomes that UNCLOS has not fully addressed, allowing judicial decisions on best methods available.

Exclusion, unilateral decision-making, and aggression will only maintain, if not intensify, the status quo.

Characterization of the Eastern Mediterranean must go beyond the dispute and conflict to include the opportunities awaiting it. Many actors are already beginning to do their part and must be celebrated for it. Coming to inclusive agreements on energy exploration holds immense potential for the region.

Jonathan Roberts is a researcher at the Transatlantic Leadership Network in Washington DC.Ambassador

John B. Craig is a senior fellow at the Transatlantic Leadership Network in Washington D.C., former Special Assistant to the President for Combatting Terrorism under Bush 43, and former United States Ambassador to Oman.

https://thehill.com/opinion/international/492341-as-eyes-turn-to-the-eastern-mediterranean-resolving-maritime-boundary

(Bloomberg) — The oil-price war between Saudi Arabia and Russia is set to unleash the biggest flood of crude ever seen, perhaps more than the world can even store.

As producers ramp up shipments in a battle for dominance of global markets, and the coronavirus crushes demand, more than a billion extra barrels could flow into storage tanks. That could strain the available space and send oil prices crashing further, with brutal consequences for the petroleum industry and producing nations.

“I don’t see how you don’t exhaust global storage capacity, if this goes on until summer at the production numbers being talked about,” said Jeffrey Currie, global head of commodities research at Goldman Sachs Group Inc.

The feud between Riyadh and Moscow has already inflicted a heavy toll.

Oil prices have slumped 32%, to about $34 a barrel, since the two exporters fell out over how to deal with the virus, severing the global alliance of producers they’d led for three years and launching a competition to offer customers the steepest discounts. The rout has driven American shale drillers such as Occidental Petroleum Corp. and Apache Corp. to cut dividends and spending.

The looming glut may still be held in check: President Donald Trump promised to take oil off the market on Friday by filling up the U.S. strategic reserve. Producers could take months to fully activate the idle assets they need to flood the market. And as low crude prices batter the two belligerents’ economies, a “truce” will probably be reached, according to Ed Morse, head of commodities research at Citigroup Inc.

But if hostilities continue, the tide of oil is likely to become a tsunami.

Saudi Arabia announced it will supply record volumes, of more than 12 million barrels a day next month, and the United Arab Emirates will push oil fields beyond their normal capacity to bolster output by about a third. Russia will add 500,000 barrels a day, while others in the fractured OPEC+ coalition, such as Iraq and Nigeria, also plan production increases.

If storage is maxed out, oil prices will likely fall until producers with the highest operating costs, most probably American shale drillers, are forced to halt output. Or the loss of revenues could strain one of the more politically-fragile producing nations — such as Venezuela or Iran — to breaking point.

U.S. shale production “won’t really start dropping until the end of the year,” said Paola Rodriguez-Masiu, an analyst at consultant Rystad Energy AS in Oslo. “So the market will be completely saturated.”

Global supply is already exceeding demand at an unprecedented rate of 3.5 million barrels a day, due to the impact of the coronavirus, according to the International Energy Agency, which advises major economies.

Surplus Supply

Once the OPEC+ nations increase supply, the surplus will balloon in the second quarter, to more than 6 million a day, Bloomberg calculations show. Goldman Sachs anticipates stock builds of a similar magnitude. By the end of the year, more than 1 billion extra barrels will have been dumped onto world markets.

In total, global crude inventories stand to expand by 1.7 billion barrels this year, according to Bloomberg’s calculations, about three times as much as during the biggest-ever surplus recorded by the IEA. That was in 1998, when Brent fell to an all-time low of less than $10 a barrel.

About 65% of the world’s total 5.7 billion barrels of oil-storage is currently in use, according to energy data provider Kayrros SAS. At current rates the theoretical limits, which are somewhat below the full figure, could be approached in just over a year, the company estimates.

“The fill rate that we are experiencing now is totally unprecedented,” said Antoine Halff, Kayrros’ chief analyst. “But even at this staggering pace, we are not running out of storage altogether. On paper, we still have some runway.”

For oil traders, there are opportunities to earn massive profits by hoarding barrels and then exploiting the difference between low short-term and higher long-term prices. Vitol Group, the largest independent trading house, has leased tanks in South Korea that could be used to take advantage of the price spread.

As tanks on land are exhausted, companies will increasingly use supertankers at sea to accommodate the excess, said Rodriguez-Masiu. The cost for storing crude on such vessels has doubled in the past three months, E.A. Gibson ship brokers estimates.

But when there’s no longer anywhere to put unwanted barrels, oil producers will have no choice but to reduce operations.

“At some point the oil price will have to drop in such a way that makes it uneconomical for producers in the U.S. to keep pumping oil,” she said.

As many of these companies have locked in revenues by selling futures contracts as a hedge, the production slowdown probably won’t occur until the end of year, Rodriguez-Masiu said. For some of the countries that rely on high oil prices to fund government spending, that may be too late.

Even before the latest crisis, prices were challenging for the “fragile five” OPEC members of Algeria, Iraq, Libya, Nigeria and Venezuela, said Helima Croft, head of commodity strategy at RBC Capital Markets LLC. Iran, facing the twin onslaught of American sanctions and depressed oil prices, is now high on the list of the vulnerable.

“This is a catastrophe for the fragile five,” she said. “It’s now become the shaky six.”

To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net

To contact the editors responsible for this story: James Herron at jherron9@bloomberg.net, Helen Robertson, John Deane

For more articles like this, please visit us at bloomberg.com

First Russia tossed a hand grenade into global oil markets. Then Saudi Arabia dropped a bomb. After the dramatic collapse of an alliance between the OPEC oil cartel and Russia, a one-day plunge of more than 30% in oil prices sent shockwaves through global financial markets already reeling from the fallout of the coronavirus epidemic. The blowup of Russia’s deal with the 13-member club of oil exporters — an alliance that has underpinned world oil prices for three years — triggered a sudden price war.

1. What’s the bustup?

Russia had joined forces with OPEC in 2016, along with nine other non-member countries, and the alliance controlled almost half of the world’s oil production. The “OPEC+” pact led to a resurgence of the cartel, which wields immense power over the world’s most critical commodity. Russia stunned oil traders when it refused to go along with production cuts pushed by Saudi Arabia at a March 6 meeting in Vienna. The kingdom — OPEC’s biggest producer and its driving force — wanted to trim output further to prop up prices as the coronavirus ravaged energy demand. Saudi Arabia responded aggressively just hours later: Its state-owned oil behemoth said it would reverse course on March 8, open the taps and slash crude prices.

2. What led to the fallout?

Talks between Russia and the Organization of Petroleum Exporting Countries broke down because the country didn’t want to be strong-armed into further cuts to its lucrative oil production. It complained that the OPEC+ deal had aided America’s shale industry. Russia was also increasingly angry with the willingness of U.S. President Donald Trump to employ energy as a political and economic tool. It was irked by the use of U.S. sanctions to prevent the completion of a pipeline linking Siberia’s gas fields with Germany, known as Nord Stream 2.

3. What does this have to do with shale?

The Kremlin was reluctant to cede further market share to U.S. shale drillers — known as frackers — that have been adding millions of barrels of oil to the global markets. An attack on shale has been tried before: When the new technique was expanding in 2014, Saudi Arabia’s strategy was to flood the market, expecting that a collapse in prices would thwart the new competition. As shale producers found cheaper ways to operate and a global supply glut dragged on, OPEC then returned to its traditional tool of constraining output, sending oil to a four-year high of more than $85 a barrel by mid-2018. The victory proved self-defeating. Higher prices re-invigorated U.S. fracking, propelling the U.S. to overtake Saudi Arabia and Russia as the world’s No. 1 crude producer. Many drillers in Texas and other shale regions look vulnerable, as they’re overly indebted and already battered by rock-bottom natural gas prices.

4. Can Russia and Saudi Arabia live with lower prices?

That remains to be seen — the two sides could always return to the negotiating table. In the short run, Russia is in a good position to withstand a price slump. Its government budget breaks even at a price of $42 a barrel and it has squirreled away billions of dollars in a rainy-day fund. Saudi Arabia, which is almost entirely dependent on oil to fund lavish government spending, holds about $500 billion in foreign currency reserves to cushion the blow. One source of potential stress: The kingdom’s currency, the riyal, has been pegged to the U.S. dollar for more than three decades, providing economic and financial stability. OPEC has a built-in competitive advantage, since its Middle Eastern members can produce crude at about a third of the cost of U.S. shale.

5. What about other countries?

Such a dramatic crash in the price of oil, if it were sustained, would savage national budgets of petro-states from Venezuela to Iran, threatening to upend politics around the world. To policy makers, volatile oil prices are an added complication as they try to shield economies from the impact of the coronavirus epidemic.

6. What’s the wider fallout?

There are winners from rock-bottom oil prices — among them China, the world’s largest oil importer, whose recovery from the virus will be key for the global economy. The U.S. — once a beneficiary of low oil prices — is now an exporter rather than a buyer. Sudden surges in oil prices are feared because of the way they could jack up costs across the global economy and slow economic growth. Now a world reeling from an economic slump triggered by the virus is enduring another sort of oil shock.

America’s shale producers already had a profitability problem. It just got a lot worse.

At a stroke, Saudi Arabia and Russia and their battle for market share have made almost all U.S. shale drilling unprofitable. Only five companies in two areas of the country have breakeven costs lower than the current oil price, according to data compiled by Rystad Energy, an Oslo-based consultancy.

Wells drilled by Exxon Mobil Corp., Occidental Petroleum Corp. Chevron Corp. and Crownquest Operating LLC in the Permian Basin, which stretches across West Texas and southeastern New Mexico, can turn profits at $31 a barrel, Rystad’s data show. Occidental’s wells in the DJ Basin of Colorado are also in the money at that price, which is where oil settled Monday.

But that’s not the case for the rest of the shale industry — more than 100 operators in a dozen fields. For them, drilling new wells will almost certainly mean going into the red.

Shale projects are heralded for their ability to be quickly ramped up and down. But because output from these wells declines much faster than from their old-school, conventional cousins, companies have to drill more of them just to keep output flat. That has meant sluggish investor returns, one of the main reasons oil and gas represents less than 4% of the S&P 500 Index.

At this point, “companies should not be burning capital to be keeping the production base at an unsustainable level,” said Tom Loughrey, a former hedge fund manager who started his own shale-data firm, Friezo Loughrey Oil Well Partners LLC. “This is swing production — and that means you’re going to have to swing down.”

Already, producers including Diamondback Energy Inc. and Parsley Energy Inc. have said they’re cutting their drilling budgets and dropping rigs. Others, such as Apache Corp. and Occidental, have indicated they’ll rein in activity.

“What they’re not saying is that they’re going to suspend activity,” Loughrey said.

In his view, a typical well in the Midland sub-basin of the Permian requires $68 oil for investors to make an adequate return within 24 months.

BloombergNEF expects producers to move away from using breakeven costs that leave out overhead and other necessary expenses as investors shift their focus to cash flow.

“At a minimum, they will need to add back interest costs to their calculus,” BloombergNEF said in a report. That means the profitability floor for most new wells will rise to $50 a barrel “in the not too distant future,” according to the report, up from $45 in the past.

The shale boom turned the U.S. into the biggest oil producer in the world and, in recent months, a net exporter of petroleum. But if prices remain near $30 a barrel, producers will be forced to ax so much drilling activity that U.S. oil production could fall by 2 million barrels a day from the end of this year to the end of next, according to Rystad.

That would be about a 20% drop.

On Monday, West Texas Intermediate crude fell 25% to settle at $31.13 a barrel, and some forecasters see it falling toward $20. Prices clawed back some of those losses Tuesday, reaching as high as $33.73.

“Even the best operators will have to reduce activity,” said Artem Abramov, head of shale research at Rystad. “It’s not only about commerciality of the wells. It’s a lot about corporate cash flow balances. It’s almost impossible to be fully cash flow neutral this year with this price decline.”

Global oil demand is set to drop this year for the first time since the financial crisis in 2009, the International Energy Agency (IEA) said on Monday, as it slashed its demand outlook by 1.1 million bpd due to the coronavirus outbreak and its impact on economies.

The IEA now sees global demand falling by 90,000 bpd year on year in 2020, the agency said in its Monthly Oil Market for March 2020, after its executive director Fatih Birol warned two weeks ago that the coronavirus outbreak could hit global oil demand growth more than initially expected.

In the February market report, the IEA had slashed its 2020 oil demand growth forecast by 365,000 bpd to just 825,000 bpd—the lowest oil demand growth since 2011, and warned that the coronavirus outbreak would lead to the first quarterly contraction in global oil demand in more than 10 years.

In view of the global spread of the coronavirus and its impact on the global economy, the agency now expects full-year oil demand to drop.

“While the situation remains fluid, we expect global oil demand to fall in 2020 – the first full-year decline in more than a decade – because of the deep contraction in China, which accounted for more than 80% of global oil demand growth in 2019, and major disruptions to travel and trade,” the IEA said in its March report.

The report commented on the collapse of the OPEC+ coalition, saying that the implication is that “the OPEC+ countries will be free to exercise their commercial judgement when assessing future levels of production.”

The IEA report comes a day after Saudi Arabia effectively launched an oil price war on Russia after the former allies abruptly ended the OPEC+ agreement last Friday. Over the weekend, the Saudis slashed their official selling prices by $6-7 a barrel to all markets including Asia, and signaled they would boost production as of April, sending oil prices into a tailspin on Monday to the biggest fall since 1991.

A sharp reduction in shale oil drilling because of crude’s crash could end up boosting US natural gas prices and potentially curb an oversupply in the global market for liquefied natural gas.
Oil markets have crashed by almost a third to less than $35 a barrel after the disintegration Friday of the Opec+ alliance, which has triggered a price war between Saudi Arabia and Russia. If the plunging price discourages shale oil drilling, the knock-on effect could be a cut in the supply of gas extracted as a byproduct, according to Goldman Sachs Group Inc.
If shale producers invest on the basis of $30-$45 per barrel of crude over the next 5 quarters, there will be about 1bn cubic feet a day less US gas production, said Goldman analysts including Brian Singer. That’s about 1% of US daily natural gas output in December.
“US producers tend to respond to prices with a lag of a couple of months, though we see the response time narrowing, given flexibility of shale and greater focus on free cash flow,” the Goldman analysts said.
Front-month US gas futures fell as much as 9.8 cents, or 5.7%, to $1.610 per million British thermal units, the lowest intraday level since August 27, 1998. Prices losing just 1/10th of a cent from there would put it at the lowest since September 1995.
The US is brimming with gas as production booms. This has been particularly acute in the Permian formation, where prices for gas extracted from oil drilling have tumbled below zero, meaning producers will pay others to take the fuel off their hands. Output from the West Texas and New Mexico shale play is rising faster than pipelines can be built to carry it away.
In Europe, which has boosted imports of US LNG, front-month benchmark Dutch prices were down 3.2% Monday after earlier falling as much as 5.8%.
If European gas prices “were to drop any further, we should see a downward adjustment in LNG exports from the US to Europe as exporters of spot cargoes would not be covering their operational costs,” said Carlos Torres Diaz, head of gas and power markets at Rystad Energy AS.
The plunge in oil may turn the global gas industry on its head. Gas supply contracts linked to oil prices, which have been out of favour as gas dropped faster than oil, will probably become attractive again. “You could certainly see gas prices in the US supported by low oil prices,” said Ciaran Roe, global director of LNG at S&P Global Platts, in an interview. Last year’s view where oil linkages were frowned upon “looks to be receding into the rear-view mirror.”

NEW YORK — Oil prices crashed on Monday, suffering their biggest daily rout since the 1991 Gulf War, after the collapse of an OPEC+ supply agreement that now threatens to overwhelm the world with oil, inciting panic throughout the energy sector.

After failing to come to an agreement to cut supply, Saudi Arabia and Russia over the weekend pledged instead to ramp up production, which could quickly flood global markets with oil at a time when demand has already weakened substantially.

The market’s reaction has been furious, with crude futures plunging by nearly 20%, while energy stocks collapse as shale producers frantically cut future expenditures in anticipation of a drastically different outlook than a few days ago.

Brent crude futures were down $8.84, or 19.5%, to $36.43 a barrel by 10:49 a.m. EDT (1449 GMT). They earlier fell by as much as 31% to $31.02, their lowest since Feb. 12, 2016.

U.S. West Texas Intermediate (WTI) crude fell $7.81, or 18.9%, to $33.47 a barrel. WTI earlier dropped 33% to $27.34, also the lowest since Feb. 12, 2016.

Should these losses hold, it would be the biggest one-day percentage decline for both benchmarks since Jan. 17, 1991, the outset of the U.S. Gulf War, when it fell by a third.

A three-year supply pact between members of the Organization of the Petroleum Exporting Countries, which includes the group’s top producer Saudi Arabia, and Russia fell apart on Friday after Moscow refused to support deeper oil cuts to cope with the outbreak of coronavirus.

OPEC responded by removing all limits on its own production, prompting fear of a supply hike in a market already awash with crude.

Despite sliding demand for crude due to the coronavirus, Saudi Arabia plans to boost its crude output above 10 million barrels per day (bpd) in April after the current deal to curb production expires at the end of March, two sources told Reuters on Sunday. Saudi Arabia also cut its official crude selling price.

The kingdom has been producing around 9.7 million bpd in recent months.

Russia, one of the world’s top producers alongside Saudi Arabia and the United States, also said it could lift output and that it could cope with low oil prices for six to 10 years.

The countries along with several other producers have cooperated for three years to restrain supply. The OPEC+ talks collapsed after OPEC effectively presented Russia with an ultimatum on Thursday, offering it a choice of accepting a deal with much bigger than expected cuts or no deal at all.

“The prognosis for the oil market is even more dire than in November 2014, when such a price war last started, as it comes to a head with the significant collapse in oil demand due to the coronavirus,” Goldman Sachs said.

Saudi Arabia, Russia and other major producers last battled for market share in 2014 in a bid to put a squeeze on production from the United States, which has not joined any output limiting pacts and which is now the world’s biggest producer of crude.

The global outbreak of the coronavirus prompted OPEC to seek additional output cuts. More than 110,000 people have been infected in 105 countries and territories and 3,800 have died, the vast majority in mainland China, according to a Reuters tally.

China’s efforts to curtail the coronavirus outbreak has disrupted the world’s second-largest economy and curtailed shipments to the biggest oil importer.

The International Energy Agency said on Monday oil demand was set to contract in 2020 for the first time since 2009. It cut its annual forecast by almost 1 million bpd and that the market would now contract by 90,000 bpd.

Major banks also have cut their demand growth forecasts. Morgan Stanley predicted China would have zero demand growth in 2020, while Goldman Sachs sees a contraction of 150,000 bpd in global demand.

Bank of America reduced its Brent crude price forecast from $54 a barrel to $45 a barrel in 2020.

“The radical shift in policy suggests that Saudi will allow inventories to build sharply over the next three quarters,” said a Bank of America Global Research report. “As a result, we now expect Brent oil prices to temporarily dip into the $20s range over the coming weeks.”

(Additional reporting by Dmitry Zhdannikov in London, Aaron Sheldrick in Tokyo, Scott DiSavino in New York and Shu Zhang in Singapore; Editing by Marguerita Choy and Edmund Blair)

Two pioneers of the U.S. natural gas export industry were forced to sell shares of the company they founded amid a global market rout and concern that a key supply deal won’t be finalized.

Tellurian Inc. Chairman Charif Souki and Vice Chairman Martin Houston sold 4 million and 3.4 million shares respectively, according to filings late Friday. In both cases, the transactions were forced by a lender to satisfy loan requirements, the filings show. Tellurian declined to comment.

Shares of the company, which is trying to develop a $28 billion liquefied natural gas terminal in Louisiana, plunged by more than half on Friday to close at $1.80. The total weekly decline was 72%.

India’s Petronet LNG Ltd., a potential major customer that Tellurian has courted, announced earlier this week it would seek competing offers. The move highlights the mounting pressure on sellers amid a worldwide glut, and adds to doubts that Tellurian will be able to secure a sizable anchor investment from Petronet for its Driftwood LNG project. The Petronet news also dashed hopes that the two companies might finalize a supply agreement during President Donald Trump’s visit to India this week.

The coronavirus outbreak, meanwhile, sent global markets spiraling lower, adding to Tellurian’s woes. The epidemic has hit China, South Korea and Japan, the world’s biggest LNG importers, particularly hard.

Tellurian said Thursday it had extended a memorandum of understanding with Petronet by two months to May 31. Under the memorandum, Petronet agreed to negotiate the purchase of as much as 5 million tons a year of LNG from Driftwood, along with an equity investment.

Collapsing LNG prices in Asia and Europe have squeezed profits for American gas exporters, already under pressure after China halted U.S. imports of the fuel a year ago amid trade tensions. Without commitments from Chinese buyers, some American export projects may be delayed or canceled.

Souki is the founder of Cheniere Energy Inc., the biggest U.S. LNG exporter, and served as its boss before being forced out. Houston was chief operating officer at BG Group Plc and was the key architect of its LNG business. BG, which has since been acquired by Royal Dutch Shell Plc, signed the first purchase agreement with Cheniere in 2011.

Souki is worth about $500 million, according to the Bloomberg Billionaires Index. That’s largely from collecting money from shares sales of Cheniere.

Libyan economic experts will study the distribution of crucial oil revenue as efforts continue to solve the war-ravaged OPEC member’s political crisis, the United Nations said.

The decision to assign the economic commission to work “on issues of immediate concern,” which also include a banking crisis, came after meetings in Cairo this week attended by representatives from across Libya’s political spectrum as well as economists and other academic experts. The experts agreed to meet again in early March, the UN mission in Libya said Tuesday in a statement.

The oil market had been closely monitoring the talks for any sign of a deal to restore output in the North African nation after supporters of eastern commander Khalifa Haftar forced ports to close mid-January, driving daily output down to about 180,000 barrels, its lowest since the 2011 uprising against long-time leader Moammar Qaddafi.

Imminent large-scale resumption, although unlikely, could add over 1 million barrels per day to the international market, complicating OPEC’s efforts to assess the impact of the coronavirus on demand.

The talks were the latest in a series of global efforts to end the conflict between the internationally recognized government in Tripoli and Haftar, whose forces control the oil-rich east and south and in April turned their sights on the capital.