Oil prices tiptoed up today as oil producer group Opec was considering additional cuts of up to 1m barrels in an attempt to stabilise prices, which have taken a battering from the coronavirus outbreak.
If cuts of this size are enacted, it will take total output curbs of over 3.1m barrels per day, equivalent to those made during 2008’s financial crisis.
The coronavirus outbreak has compounded the woes of the oil market, which was already under considerable pressure due to a supply glut, and has seen prices fall about 20 per cent this year.
Brent crude rose half a per cent this morning to reach $52.17. At the beginning of the year the measure had briefly been trading above $70.
West Texas Intermediate was also up by a similar margin, reaching $47.44.
Han Tan, market analyst at FXTM, said: “With demand-side uncertainties having already dragged Brent futures about 19 per cent lower since the start of the year, oil’s upside appears significantly capped amid persistent concerns over the coronavirus outbreak”.
The move would be the latest in a long line of cuts by the oil cartel, which mean that curbs of 2.6m are already in place.
Opec’s technical committee has said that the cuts should stay in place until the end of the year, but there are concerns that Russian opposition to deeper curbs could scupper the agreement.
A source told Reuters that the outcome could hinge upon Wednesday’s meeting between Saudi Energy Minister Prince Abdulaziz bin Salman and his Russian counterpart Alexander Novak.
Jane Sydenham, investment Director at Rathbone Investment Management said that deeper cuts may help to prop up the meeting: “Given the energy transition taking place, there has inevitably been downward pressure on the price of oil and many may have expected oil prices to fall further, following the huge reduction in oil consumption in China in recent weeks.
“However, Saudi Arabia has already signalled their intention to attempt to co-ordinate a reduction in the oil supply to the market by another million barrels a day at this week’s OPEC meeting.
“This would mean total recent supply cuts of over 3.1 million barrels of oil per day – equivalent to the production cuts made during the financial crisis in 2008. It’s a significant reduction in oil supply which should help to prevent the price of oil sliding any further.”