Oil industry is the most suffering industry due to coronavirus (COVID-19), which was first identified in Wuhan, China, and spread to 60+ countries. Oil demand sharply declined as a result of the global growth concerns derived from the outbreak and oil prices depreciated more than 30%. Consequently, the markets focused on the meeting of Conference of the Organization of the Petroleum Exporting Countries (OPEC) with regards to the oil prices.
OPEC Could Agree on a Deeper-Than-Expected Supply Cut
178th (Extraordinary) Meeting of the OPEC Conference started today at 11:00 (GMT+1) in Vienna, Austria and the Joint Ministerial Monitoring Committee will attend the meeting. We would like to remind you that Monthly Oil Market Report published on February 12 indicated a 10k barrels decline per day, compared to the last month, and global oil supply reached 100 million barrels. The report further noted that outbreak of the Coronavirus in China during 1H20 is the major factor behind this downward revision and that global oil demand is now forecast to grow by 0.99 mb/d and average 100.73 mb/d for 2020.
The decline in oil demand due to growth concerns and OPEC’s forecast on a decline in global oil demand in 2020 show that an excess supply is waiting ahead of us. In this context, the meeting of OPEC led by Saudi Arabia and non-OPEC countries, there will be a supply cut for sure. However, the markets expect that the organization will decide on 600,000 – 1,000,000 bpd oil output cut as a precaution against the sharp decline derived from COVID-19.
Thus, the oil recovered from the lower levels and it may also get strengthened with the help of the organization’s supply cut in line with market expectations. If the members decide a supply cut above the expected numbers, the prices may sharply rise.
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