A $30 Oil Price Is the Real Virus Threat to OPEC
The oil cartel and its international partners will undoubtedly agree to productions cuts this week. But will they be big enough?
Will OPEC+ cuts be more effective than attempts to contain the Covid-19 virus?
Photographer: SeongJoon Cho/BloombergIt’s finally upon us. The week when ministers from the oil producing countries of OPEC and their allies meet to decide on the future of their latest round of output cuts. Having failed to persuade Russia to bring the meeting forward, Saudi Arabia will now hope to convince its biggest non-OPEC ally of the need to make deeper cuts in the face of a demand slump triggered by the Covid-19 virus. Success is not a foregone conclusion and failure will be costly.
The looming pandemic has already made its mark on oil markets. U.S. West Texas Intermediate crude is now firmly below $50 a barrel and global benchmark Brent briefly followed it on Friday. That is uncomfortable territory for producers everywhere and, without a clear indication of deeper output cuts from this week’s meetings, prices will fall further.