Saudi Arabia Aims For Additional Cuts As Oil Plunges Below $50 By Tsvetana Paraskova Oilprice.com, February 28, 2020

A night view of the Saudi capital, Riyadh, file, February 28, 2020

 

Saudi Arabia Aims For Additional Cuts As Oil Plunges Below $50

Faced with a slump in demand and plunging oil prices, OPEC’s top producer and de facto leader Saudi Arabia is asking members of the OPEC+ group to consider an additional collective cut of 1 million bpd when the coalition meets in Vienna next week, Financial Times reports, citing five people with knowledge of the talks.

The Saudi proposal has been discussed this week during a visit to Saudi Arabia of OPEC’s Secretary General Mohammad Barkindo, the FT reports.

The 1-million-bpd collective cut would be 400,000 bpd higher than an initial proposal of a technical panel of the OPEC+ group which proposed earlier this month that the coalition reduce production in Q2 by 600,000 bpd to counter the slump in oil demand caused by the coronavirus outbreak.  

Within OPEC, several of the key members are leaning toward a deeper cut, four sources familiar with the talks told Reuters on Friday.  

The OPEC+ group’s joint technical committee (JTC) issued a proposal on February 8 that the producers extend the cuts as-is until the end of 2020 and deepen those cuts in the second quarter in response to the fact that the coronavirus “has had a negative impact on oil demand and oil markets.”

After that proposal, however, oil prices have slumped as the coronavirus spread fast outside China to Europe and the Middle East, and the equity and oil markets saw massive sell-offs. In just a week, oil prices lost more than $8 a barrel, and Brent Crude was trading at $50 early on Friday.

The demand destruction and the oil price rout make deeper cuts more urgent for OPEC’s leader Saudi Arabia, which can’t be happy with $50 oil considering that it needs $80 per barrel to balance its budget.

Meanwhile, Russia continues to refuse to announce its position regarding deeper cuts by the OPEC+ coalition, but admitted that the coronavirus outbreak could lead to additional downward revisions to the global oil demand growth outlook for 2020.

In view of the price slide and continued fears over global economic slowdown and further demand loss, oil prices could further slump if OPEC+ doesn’t act decisively next week.

“We believe the market will be disappointed with anything that falls short of the JTC recommendation,” Warren Patterson, ING’s Head of Commodities Strategy, said on Friday.

https://oilprice.com/Energy/Crude-Oil/Saudi-Arabia-Aims-For-Additional-Cuts-As-Oil-Plunges-Below-50.html

Oil Prices Set For Worst Weekly Plunge In Four Years

Oil prices sank for a sixth consecutive day early on Friday and were on track for their biggest weekly drop in more than four years as the coronavirus outbreak continues to roil global equity and oil markets.

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At 10:53 a.m. EST on Friday, WTI Crude was plunging by 5.92 percent at $44.30, and Brent Crude was down 4.58 percent at $49.36, after falling briefly below $50 earlier today.  

The sell-off on the oil market has continued for more than a week as the coronavirus spread quickly outside China—to Europe, the Middle East, and as of recently—Africa.  

In the countries outside China worst hit by the coronavirus, South Korea now has more than 2,000 confirmed cases of coronavirus infections, with 16 deaths as of early Friday, and Italy had 650 cases with 17 deaths. Many countries, including the Netherlands, Azerbaijan, Belarus, and Lithuania also reported their first cases on Friday, as did New Zealand and Nigeria—with Nigeria’s the first known case of the coronavirus in sub-Saharan Africa.

The World Health Organization (WHO) warned that the outbreak has “pandemic potential,” which further stoked fears on the markets that a significant slowdown in global economic activity and travel could soon follow.

All major equity markets have been suffering all week, with the S&P 500 index going through its fastest correction in history on Thursday. On Friday, stocks were also set for steep losses and for their worst weekly drop since the 2008 financial crisis.

Oil prices have been on a losing streak since last Friday, when the first reports of a sharp rise in coronavirus cases outside China emerged.

The oil price rout, the current oil demand loss, and the feared additional demand destruction in case of pandemic have reportedly prompted OPEC’s largest producer Saudi Arabia to ask members of the OPEC+ group to consider an additional collective cut of 1 million bpd when the coalition meets in Vienna next week, Financial Times reports, citing five people with knowledge of the talks.   

https://oilprice.com/Energy/Energy-General/Oil-Prices-Set-For-Worst-Weekly-Plunge-In-Four-Years.html

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