On Thursday, crude oil futures rose on the prospect of the meeting of the world’s biggest oil producers to deal with the output cut as an effort to balance the market.
At 00.34 GMT, Brent crude oil futures climbed by 2.5% or 81 cents to USD33.65/barrel after hitting a high of USD33.90/barrel. US WTI crude oil futures surged by 4.3% or USD1.08 to stand at USD26.17/barrel.
The Organization of the Petroleum Exporting Countries and its non-member allies (OPEC+) will meet via a video conference today.
There is a high expectation on the success of this meeting as media reports indicated that Russia was prepared to cut 1.6 million bpd of its output. If realized, the reduction would be the biggest from what OPEC has ever agreed on.
Furthermore, Algeria’s energy minister fanned the fire by stating that he expected a fruitful meeting.
Analyst Lachlan Sahw of National Australia Bank expected a deal, but the impact would be short-term as the market would immediately refocus on the fundamental issues in the global market.
Following the OPEC+ meeting, the G20’s energy ministers will meet to address the impact of the coronavirus pandemic on the global energy market. The positive result estimated from this meeting would be adding to strategic reserves.
However, many are still doubting the effectivity of the OPEC+ oil cut in controlling prices as oil has lost half their value since the start of this year, combined with the 30% of demand decline.
The aggressively rising oil stockpiles will also flood the market with cheap oil even after the demand recovers.
On Wednesday, the US Energy Information Administration said that the country’s crude oil inventories soared by 15.2 million barrels and posting the record one-week increase.
Capital Economics expressed doubts that OPEC+ would commit to a sizable and unconditional output cut as it would only inconsiderably cushion prices on the severe state of demand.
