Saudis Urge More Than 1 Million Bpd Oil Cut To Prop Up Prices, Russia Opposes
Update (0800ET): The Wall Street Journal reports that Russia opposes the Saudi plan to deepen OPEC+ cuts by 1.2mm b/d.
Developing…
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As we detailed earlier, Brent crude futures were up 75 cents, or 1.45%, at 52.61 a barrel at 0700ET Wednesday after a three-day move of +10%, following expectations that major oil producers could make significant production cuts at the OPEC meeting on March 5.
Brent has tumbled into a bear market, down 26.5% in 38 sessions, following the outbreak of Covid-19 in China, now spreading across the world, has slashed global oil demand.
“This is a sudden, instant demand shock,” said Jim Burkhard, vice president and head of oil markets at IHS Markit Ltd.
“The scale of the decline is unprecedented.”
OPEC+ Joint Ministerial Monitoring Committee, the body that oversees production, will meet on Wednesday, ahead of the formal meeting, to discuss cuts. Saudi Arabia is urging OPEC+ to come to an agreeance ahead of Thursday for a reduction of 1 million barrels per day to compensate for lost demand seen by the virus crisis, Bloomberg notes.
“The recommended 600,000-barrel-a-day additional cut for the second quarter of 2020 will be seen as too little,” Mohammad Darwazah of consultant Medley Global Advisors said in a note. “It is clear that the group is mulling a deeper production pullback.”
The push for deep cuts comes as crude had its worst weekly decline since the 2008 financial crisis on mounting macroeconomic headwinds developing because of the virus spread, which forced Saudi Arabia to demand Russia jump on board with production cuts.
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