On Wednesday disputes arose over oil prices supported by hopes that negotiations between OPEC and the alliance member states would trigger fruitful results. Countries are hoping that the basic producers would reduce their output production. Such that the oil prices that subsided amid corona outbreak could prop.
The meeting was conducted on Thursday through a videoconference between OPEC and allied producers. Compared to the March conference, the majority expected this meeting to be successful. The prior conference ended in differences between Saudi Arabia and Russia, with Saudi declaring a price war.
Bjornar Tonhaugen of Rystad Ebergy stated that the only way to solve the oil price war was through the two allies settling their differences and reaching a consensus. Especially since both are large exporters of crude oil.
“The coming extraordinary producing countries meeting is the only hope on the horizon for the market,” said Bjornar Tonhaugen of Rystad Energy.
Oversupply concerns warry countries.
“Oil prices remain heavy on oversupply concerns and after the Saudi Energy Minister Price Abdulaziz did not offer any hints of optimism that the OPEC+ production cuts would be extended beyond March,” said Edward Moya, senior market analyst at OANDA in New York.
Because of the unlikelihood of the likes such as Saudi Arabia to cut on their production, crude will suffer a great plunge. Especially since countries have reinstated travel restrictions because of the corona outbreak. As such crude will lose its value as the supply outweighs the demand. Most transport industries i.e. airlines are on suspension.
Should the virus conquer what becomes of the industry?
Goldman Sachs said in case coronavirus conquers over travel and other industries; the global economy will deteriorate. Such that the demand for oil could decline by about 263000 bpd. For instance, as of 2020 30th March, Brent recorded a decline of $21.65, its greatest plunge since 2002.
Prices ease as Libya declares a forced Majeure.
On Tuesday, oil prices increased following a forced Majeure on two major fields in Libya. The two major oil fields, Sharara and El Feel oilfields began shutting down thereby reducing the total crude oil output from the Organization of Petroleum Exporting Countries. As of now, the crude output is at the normal extraction level. However, the closure, declared by National Oil Corporation almost cost the total crude output produced in the country.
Consequently, Brent crude LCOc1 rose by 35 cents which is equivalent to 0.5% increase at $65.20 a barrel. While West Texas Intermediate CLc1 traded at 12 cents which equals an increase of 0.2% at $58.66 per barrel. As such the global oil market remains sustained with ample stocks. If the crude output in Libya remains controlled for a good period of time, the country will start producing around 72000 bpd barrels per day instead of the 1.2million barrels it initially produced.
Warren Patterson, an ING analyst says that if Libya’s output remains controlled the global oil production would swing from surplus to deficit.
More:
- Oil Prices Fall to a 17-year Low as Saudi Arabia-Russia standoff Continues
- Corruption as the main problem facing oil production in Kenya
