Photograph — Invest in Albania

Global oil prices have seen a rebound so far this week after sliding more than 20 percent from their January peak, due to a dent on fuel demand caused by the spread of the novel coronavirus. The virus, which broke out in China, has infected more than 89,000 people across 60 countries and killed over 3,000 people globally.

Since the outbreak, many factories around the world have been shut due to fear of the deadly virus spreading further, while global travels have also been largely limited. All of these combine to reduce global demand for crude oil, leading to falling prices.

But the recent rise in international price benchmarks – U.S. West Texas Intermediate and Brent crude – suggests traders believe the Organization of the Petroleum Exporting Countries and Russia will agree on a new cut in oil production when they meet in Vienna today and tomorrow (March 5-6) as they look to halt plunging oil prices.

The meeting will be watched closely by oil producers, traders, and other market participants because countries representing roughly half of world oil supplies will be present, reports say. Hopes are that the gathering will lead to new and deeper production cuts that could help lift prices, which fell about 14 percent last week.

OPEC has recommended an additional cut of 1 million barrels per day. Before now, the body and its allies (OPEC+), which Russia and Saudi Arabia belong to, had decided to cut output by 2.1 million bpd, a deal which began in January and was supposed to last till the end of this month. But current events have led OPEC to extend the deadline beyond March while proposing the additional 1 million output cut.

Russia is yet to agree to the new proposal and there are concerns it may not offer its support. But President Vladimir Putin earlier this week offered some hope by suggesting that his country was willing to work with OPEC to try to stabilize prices.

More so, Leonid Fedun, vice-president of Russia’s second-biggest oil producer Lukoil, told Reuters this week that OPEC’s proposal would be enough to balance supply and demand in the market and lift oil prices back to $60 a barrel. This further suggests Russia, the world’s biggest oil exporter after Saudi Arabia, may be willing to agree.

“Conoravirus… is a short-lived factor which is affecting oil prices… There will be an OPEC (and non-OPEC) meeting, compensatory measures will be taken which will take the excess oil off the market and oil price will rebound,” Fedun said.

Ahead of the meeting, oil prices rose more than 1 percent on Thursday. Brent crude rose by 67 cents, or 1.3 percent, to $51.80 per barrel by 04:36 GMT (05:36 Nigerian time), while WTI was up by 55 cents, or 1.2 percent, at $47.33 per barrel.

Elsewhere on Ventures

Triangle arrow