The Organisation of the Petroleum Exporting Countries (OPEC) and its allies will meet soon to discuss deepening their production cuts, in an effort to stem the sharp decline in oil prices due to a demand scare from the coronavirus outbreak.
OPEC officials disclosed that a scheduled meeting is perfected to hold in early March with Russia and their other non-OPEC partners to review their production deal, and possibly increase their cutbacks. Now market speculation is focused on another large reduction by producers, who are anxious to steady the market.
On Friday, Russian Energy Minister Alexander Novak said that the group could discuss moving its meeting forward but said it needs several more days to monitor the situation. There was some speculation a new meeting could be as early as the coming week.
“If you’re going to meet early, then you had to do something,” said Helima Croft, head of global commodities research at RBC. “I don’t think you would call an early meeting just to roll it over.”
Oil’s drop has been stunning as it follows a large reduction in market supply after a Libyan pipeline was shutdown, forcing 800,000 a day off the market. At the same time, OPEC and Russia have been maintaining their agreement to withhold 1.8 million barrels a day.
“It has completely changed the dynamic. It takes a hatchet to the demand growth outlook for this year,” said Kilduff. “There was a hope for the economy, but now it’s going out the window. China is the flip of Saudi Arabia. That’s the swing demand center, and now the swing demand center is shutting down.”