Global oil prices finished the week with gains of 22% plus but uncertainty will dominate the week as OPEC and its allies were due to meet later today to try to arrange a cut in global oil production.
But the meeting now looks like being held on April 9 because it is proving difficult to get some sort of agreement. So more time is needed for talks between the parties.
No time for a meeting has been revealed and details of the agenda are thin, but analysts say a production cut will be the only topic of substance to be discussed.
And if this meeting fails or is inconclusive, then watch oil prices come under pressure and tank.
Russia and the Saudis are still sniping over the collapse of the previous production cap. The Russians are insistent that America cuts production.
Talk of a global production cut intensified after President Trump claimed Saudi Arabia and Russia had already talked about such a move – a point the Russian President Vladimir Putin denied on Thursday.
Australian oil stocks saw big rises last week – Santos shares jumped 17%, Oil Search, 16%, Beach, 24% and Woodside, 17% as well. The lack of a firm date for the OPEC talks will not make investors confident.
But the International Energy Agency (IEA) reckons any cut won’t be enough because global demand is falling as the shutdown triggered by the spread of COVID-19 sees more business forced to lack down and stop operating.
On Friday President Putin made it clear that his country wants US production to be cut from its current daily total of 13 million barrels as part of any global cap on output, a situation most unlikely for anti-trust and political reasons.
Donald Trump did not mention US production cuts at all in his tweets and statement on Thursday and Friday.
OPEC is talking about a cut of around 10% of global supply, perhaps as much as 15% – that’s around 10 to 15 million barrels a day.
News of the meeting saw global prices rose again on Friday for a second day on hopes of a cap – West Texas Intermediate WTI crude for May futures rose $US3.02, or 11.9%, to settle at $US28.34 a barrel after climbing 24.7% on Thursday in New York.
For the week, WTI rose 32% higher—posting the largest one-week percentage rise on record, according to Dow Jones.
In Europe, June Brent crude climbed $US4.17, or 13.9%, to $US34.11 a barrel after a 21% surge on Thursday. It saw a weekly gain of 22%.
Traders ignored the terrible 710,000 surge in US jobless numbers in the March labour force report – the rise only partly reflected the rise in jobless claims in March of close to 3.5 million. It was much worse than market forecasts which were around 500,000 to 550,000.
An important development late Friday – possibly the most important development for some years in the US oil industry – was a huge fall in the number of rigs actively looking for oil across the US of 62.
Baker Hughes said in its weekly rig use report that the fall followed a drop of 40 the week before and 19 the week before that for a three-week fall of 121.
The total active US rig count, meanwhile, also declined by 64 to 664, according to Baker Hughes.
That’s the lowest since early 2016 and takes the fall in the number of active oil rigs to 17% in three months this year.
It was the largest weekly fall for five years and leaves the number of active rigs down more than 40% from the peak of 1,083 rigs in the final week of 2018.
The meeting of OPEC and allies such as Russia has been scheduled for April 6, but details were thin on the exact distribution of production cuts. No time has yet been set for the meeting, OPEC sources said.
A believable global deal to cut 10 million to 15 million barrels a day would require participation from nations such as Norway (Western Europe’s biggest producer), the US, Brazil, Canada, and even China.
Major global producers have already cut output production with or without OPEC, as fuel demand has dropped precipitously and storage around the globe (especially in the US) is rapidly filling.
Analysts did not heed the warning from the International Energy Agency on Friday that a cut of 10 million barrels a day would not be enough to counter the huge fall in oil demand.
IEA head, Fatih Birol told Reuters he doubted a cut of 10 million barrels a day would make much difference.
“Even with output cuts of 10 million barrels per day (BPD), the equivalent of 10% of global supply, oil inventories would still rise by 15 million barrels a day in the second quarter, Birol said.
“This would mean that there will still be huge pressures on global oil markets.
“Monday’s meeting with OPEC+ countries can well be a good start, but even the numbers people are talking about may not be enough to find a solution to the problem. It would only help to mitigate the damage we are seeing,” Birol told Reuters.
A cut of 10 to 15 million barrels will need the participating of producers other than Russia, the Saudis, UAE, and Kuwait.
