Oil at 3-year low on OPEC+ production cut indecision amid coronavirus fears
Brent crude settled below $50 a barrel for the first time since July 2017, as uncertainty loomed over whether Russia would agree to OPEC’s proposal for a large production cut.
Futures in London fell 2.2% as OPEC ministers extended their initial proposal for a 1.5 million-barrel-a-day supply reduction to year-end, according to delegates. The reduction is still contingent on Russia’s support, which is so far not evident. OPEC Secretary-General Mohammad Barkindo’s reassurance of the group’s commitment to stabilizing oil markets failed to quell oil prices.
“There’s a lot of skepticism about Russia’s cooperation and that is causing distress in the market,” said Rob Haworth, senior investment strategist at U.S. Bank Wealth Management in Seattle. “There’s a meaningful risk we could go lower from here.”
The need for the oil cartel to curb supply will be more pressing this year as global markets falter over fears of the coronavirus, or Covid-19, spreading, which is also denting oil demand. Oil producers are struggling against a weakening demand outlook, the likes of which hasn’t been seen in years.
OPEC estimates oil-demand growth at just 480,000 barrels a day this year, down from a forecast of 990,000 barrels last month.
Large Wall Street banks and consultancies are even anticipating global oil demand contracting in 2020 for only the fourth time in nearly four decades. The International Energy Agency will slash its estimates on Monday, the group’s executive director Fatih Birol said in Washington.
Global Covid-19 cases topped 97,000 with infections continuing to surge in the US, Italy and Iran, prompting the head of the World Health Organization threatening to name countries that aren’t doing enough to fight the outbreak.
Brent futures for May dropped $1.14 to settle at $49.99 a barrel on the ICE Futures Europe exchange. West Texas Intermediate futures for April delivery fell 1.9% or, 88 cents, to settle at $45.90 a barrel on the New York Mercantile Exchange.