Oil Price Fundamental Daily Forecast – OPEC+ Considering Cutting Crude Output an Additional 500,000 bpdRussia is ready to cooperate with OPEC on global oil markets, a Kremlin spokesman said on Tuesday, declining to comment further.
U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher on Tuesday shortly after the regular session opening. After hitting a multi-month low earlier in the session, prices are rebounding amid hopes for new output curbs from OPEC and its allies to offset any potential decline in demand triggered by the coronavirus.
People familiar with the matter told Reuters on Monday that OPEC and its allies including Russia, known as OPEC+, were considering cutting crude output by a further 500,000 barrels per day (bpd) due to the impact on demand from the coronavirus.
“A some half-a-million barrels (per day) cut is expected but we won’t rule out an even deeper cut should the situation worsen,” said Margaret Yang, analyst at CMC Markets. “This expectation boosted oil trading today.”
Kremlin Says Russia Ready for OPEC Cooperation, But Offered No Details
Russia is ready to cooperate with OPEC on global oil markets, a Kremlin spokesman said on Tuesday, declining to comment further.
The Kremlin said on Monday that President Vladimir Putin and Saudi Arabia’s King Salman spoke by phone and confirmed their readiness to continue cooperating in the OPEC+ format to ensure stability on the global oil market.
“Russia is ready to cooperate in this format,” Dmitry Peskov told reporters during a regular conference call. He declined to comment when asked if Russia was ready to further cut its oil production.
OPEC Considering Earlier Than Expected Meeting
OPEC and allies including Russia, known collectively as OPEC+, are considering holding a ministerial meeting on February 14-15, OPEC+ sources said, earlier than the next planned meeting in March.
BP’s CFO Brian Gilvary told Reuters the economic slowdown brought on by the virus will reduce oil consumption for the whole year by 300,000 to 500,000 barrels per day (bpd), roughly 0.5% of global demand.
Meanwhile, Goldman Sachs warned that while it sees oil producers responding to the situation by cutting supply, the coronavirus outbreak’s impact on demand is likely to keep volatility in spot prices elevated.
The combination of crude oil hitting a value area and speculation that OPEC will cut supply is helping to fuel a short-covering rally on Tuesday. The chart pattern indicates the markets may be forming a potentially bullish closing price reversal bottom. If confirmed, this could lead to a 2 to 3 day counter-trend rally.
Furthermore, “Oil prices are now at levels where we would expect a supply response from both OPEC and shale producers, and where China would likely seek to build crude inventories,” Goldman said in a note.