An important day or so for the global oil industry today and tomorrow with OPEC and its various allies meet (via online links) to discuss a new attempt at a production cap.
It may not be successful because there has been no sign yet of any agreement between Saudi Arabia and Russia. But if there is one it will be leaked ahead of the meeting starting at midnight tonight, Sydney time.
At the same time, US production saw its largest ever week fall in output – 600,000 barrels a day – last week, which could just help see an agreement at the meeting.
Oil prices finished higher Wednesday, buoyed by a weekly decline in US crude production, as investors grow hopeful that major oil producers will agree to output cuts tonight or Friday (if it continues).
The US Energy Information Administration reported a weekly decline of 600,000 barrels a day in domestic crude production on Wednesday from a near-record level of 13 million barrels a day to 12.4 million barrels a day for the week ended April 3.
It also reported, however, that US crude supplies rose for an 11th straight week, jumping by a massive 15.2 million barrels last week. That means US stocks of oil are up over 6%, or 29 million barrels, in the last two weeks—that equates to over 2 million barrels a day.
US oil industry analysts say that processing runs by US oil refineries last week were the lowest in a decade as demand continues to plunge for oil products such as jet fuel, petrol, and diesel, plus petrochemical feedstocks.
US demand for petrol dropped to a record low last week thanks to the lockdown of more than 40 states which has slashed driving.
All this left traders with more hope than the day before and West Texas Intermediate crude for May delivery rose $US1.46, or 6.2%, to settle at $US25.09 a barrel. June Brent crude rose 97 cents, or 3%, to $US32.84 a barrel.
Media reports suggest that the first meeting tonight is merely a formality as the key decision-makers, Saudi Arabia and Russia, have already had direct discussions in advance, and Saudi Arabia has already had side talks with its partners, Kuwait and (United Arab Emirates).
Rather than the 10 to 15 million barrels a day suggested last week by President Trump, the cut is more likely to be around 8 to 10 million barrels a day. The cut could be until the end of June.
The news by the US government of the fall in US production last week was well-timed and will be in the back of everyone’s minds at the OPEC discussions as an American ‘contribution’.
But a cut, even of 10 to 15 million barrels a day won’t help because it will still leave the same amount as a surplus caused by the impact of COVID-19 on-demand around the globe.
Remember, no deal or a bodgy agreement and oil prices will slump, again.
