Oil Steadies as Market Waits for Clarity on OPEC Production Cut

The U.S. crude benchmark is still on track for a weekly gain of around 3%, following a 16% drop the previous week.

James Thornhill

06 Mar 2020, 09:59 AM IST

Oil Steadies as Market Waits for Clarity on OPEC Production Cut

A crew man stands on the deck of the crude oil tanker ‘Devon’ as it sails through the Persian Gulf towards Kharq Island oil terminal to transport crude oil to export markets in the Persian Gulf, Iran. (Photographer: Ali Mohammadi/Bloomberg)

(Bloomberg) -- Oil clawed back some lost ground in Asian trading as investors sought clarity on whether Russia would agree to OPEC’s proposal for a large production cut to combat the impact of the coronavirus.

Futures in New York were up 0.4%, after dropping 1.9% Thursday. OPEC ministers extended their initial proposal for a 1.5 million-barrel-a-day supply reduction to year-end, according to delegates, but the reduction is still contingent on Russia’s support, which is so far not evident. OPEC Secretary-General Mohammad Barkindo’s offered reassurance of the group’s commitment to stabilizing oil markets, but sentiment remains fragile.

The U.S. crude benchmark is still on track for a weekly gain of around 3%, following a 16% drop the previous week, after rallying on hopes for stimulus measures in the world’s top economies to cushion the blow from the virus.

Drivers
The International Energy Agency plans to revise down its oil-demand forecasts next week because of the spreading coronavirus. Global oil demand could drop in 2020 due to the virus outbreak, Equinor CEO Eldar Saetre said in an interview. “There’s a high level of uncertainty and a broad range of outcomes,” he said. Saudi Aramco is delaying the release of its monthly crude-pricing announcement, an exceptional step by the world’s biggest oil exporter, as it waits to see if the OPEC+ alliance will deepen cuts in global output. Exxon Mobil Corp. is slowing the pace of its flagship development in the Permian, one of the first signs that oil majors are throttling back on production in response to the recent price slump.

Drivers

The International Energy Agency plans to revise down its oil-demand forecasts next week because of the spreading coronavirus.
Global oil demand could drop in 2020 due to the virus outbreak, Equinor CEO Eldar Saetre said in an interview. “There’s a high level of uncertainty and a broad range of outcomes,” he said.
Saudi Aramco is delaying the release of its monthly crude-pricing announcement, an exceptional step by the world’s biggest oil exporter, as it waits to see if the OPEC+ alliance will deepen cuts in global output.
Exxon Mobil Corp. is slowing the pace of its flagship development in the Permian, one of the first signs that oil majors are throttling back on production in response to the recent price slump.

Prices
West Texas Intermediate futures for April delivery rose 16 cents to $46.06 a barrel on the New York Mercantile Exchange at 10:11 a.m. Sydney time. April WTI ended Thursday’s session down 88 cents at $45.90 a barrel. Brent futures for May dropped $1.14 to settle at $49.99 a barrel on the ICE Futures Europe exchange.

To contact the reporter on this story: James Thornhill in Sydney at jthornhill3@bloomberg.net

To contact the editors responsible for this story: Ramsey Al-Rikabi at ralrikabi@bloomberg.net, Rob Verdonck