COVID-19 has birthed an oil shock the likes of which the world has never seen. A mix of oversupply and lockdown-induced demand destruction have slammed oil exporters. Despite Russia’s reputation as a “Kalashnikov economy” – low-tech, cheap, and nearly indestructible – this shock is different than previous ones Moscow has weathered.
The coronavirus has yet to run its course, and most focus is now drawn to the immediate damage to the Russian economy. Moscow is party to a renewed OPEC+ agreement to collectively cut roughly 10 million barrels of production. The latest deal has helped, but the overall story is clear. Demand will have fallen by an unprecedented amount for the year, and there’s growing unease among traders and international oil companies that