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DiMeo Schneider & Associates

Investment Manager Research | COVID-19

In Focus: Energy Spotlight – Saudi Arabia and Russia Face Off

March 10, 2020

Recent News
Leading into the weekend, the market expected the Organization of the Petroleum Exporting Countries (OPEC) to cut supply and support falling oil prices due to decreased demand as a result of COVID-19 (coronavirus).

In an unexpected turn, disagreements between Saudi Arabia and Russia led to the opposite outcome; both countries discussed increasing production to drive down energy prices hoping to rout out competitors. Fears of additional supply at a time of weak and uncertain demand led oil prices lower on Monday, March 9 in one of its largest single day moves since the Gulf War.

Impact on Midstream Assets
While midstream assets are mostly in the moving business, not discovery and extraction, they are impacted by such a material change in crude oil prices. Weaker demand and lower prices could lead to lower volumes, which may negatively impact the cash flows of midstream businesses. As a result of these developments, we believe there are four key areas investors should consider.

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