Will Russia agree to the proposal to reduce output by more than 1 mil bpd?
That is the key question as all eyes turn towards Vienna over the next two days. As things stand, the expectation is that OPEC members – namely Saudi Arabia – will be pushing for output cuts of 1 mil bpd at the very least.
As mentioned yesterday, the usual case is that Russia always plays hard ball in the lead up to the meeting but then they always cave when it comes to making a decision.
So far, the market reaction is telling something similar despite murmurs of Russia rejecting the proposal of a 1.2 mil bpd output cut yesterday.
The thing to watch out for with all OPEC meetings is the leaks during the course of the day. However, OPEC has said that they will block press access during the period so that may affect how quick information will be available about any decision.
Either way, expect any lift in oil market sentiment to be short-lived as the world economy continues to take a hit amid the coronavirus outbreak. This chart also presents a compelling argument for why OPEC is beginning to lose their grip on the oil market:
US oil production last week soared to a new record high of 13.1 mil bpd, that’s nearly half of what OPEC members are pumping out in February i.e. 27.8 mil bpd.
As such, an extra 1 mil bpd curb in terms of OPEC output will do little if US shale continues to grow at a pace seen over the last three years.