How the US oil price fell below zero | FT
Oil prices fell 4%
Amid growing doubts about Russia’s readiness to approve production cuts.
Oil prices fell more than 4% on Friday amid growing fears that Russia may refuse to approve OPEC’s proposed production cuts.
The global benchmark Brent crude oil index on Friday morning traded at $ 48.08, down more than 3.8%, while the US interim WTI index was $ 44.22, down 3.7%.
This came after a senior Russian source told Reuters that Moscow was not ready to support OPEC’s call for deeper production cuts. Instead, a non-OPEC RF will be willing to accept only the existing OPEC cuts.+.
«This position will not change», – a source told Reuters on Friday morning.
The Organization of the Petroleum Exporting Countries (OPEC) on Thursday pushed for crude oil production by OPEC and associated producers – a group known as OPEC + – to be cut by an additional 1.5 million barrels per day in total until the end of 2020. The telephone meeting took place on the eve of the OPEC + meeting scheduled for Friday in Vienna.
OPEC ministers said that non-OPEC countries should contribute 500,000 barrels per day to the overall additional production cut. But Russia and Kazakhstan, both OPEC + members, said they would not agree to deeper cuts, which increases the risk of a collapse in cooperation, which has already pushed oil prices higher since 2016..
Some analysts expected Moscow to end up approving the deal.
«If he says “not”, the whole union could collapse, and with it any new bilateral trade and investment deals, as well as the strategic influence that Moscow can provide by participating in a production agreement», – said in a research note from RBC Capital Markets. – There will be many high-level calls between Moscow, Riyadh and Abu Dhabi in order to reach an agreement».
According to Goldman Sachs, even with a deep cut in production, the OPEC + deal will not be able to prevent a surplus of the global oil market in the second quarter or a sequential decline in prices in the coming weeks. In April, the bank kept the forecast for the price of Brent at $ 45 per barrel.
«Ultimately, a recovery in demand, rather than a reduction in supply, will be the necessary catalyst for a sustained price recovery.», – Bank analysts believe.
Meanwhile, ANZ predicts that global oil consumption could fall by 1.6 million barrels per day in the first half of 2020 and fall by about 300 thousand barrels per day throughout the year..
«Growth may return in the second half of the year (second half of 2020), but is unlikely to be sufficient to compensate for losses», – market analysts say.