Oil prices rise ahead of OPEC summit and discussion of supply cuts

5 March 2020 (Last Updated March 5th, 2020 13:05)

Oil prices have increased prior to OPEC meeting in which Saudi Arabia is expected to push OPEC+ Group to agree on further output cuts to support the prices.

Oil prices rise ahead of OPEC summit and discussion of supply cuts
Over five million people are currently employed in the OFS sector at global level, but this could decrease to four million due to coronavirus. Credit: arbyreed.

Follow the latest updates of the coronavirus outbreak on our timeline.

Oil prices have increased in anticipation of Saudi Arabia pushing oil-producing countries to agree to further production cuts.

Oil producers hope the cuts will increase oil prices, which have fallen by a fifth since the start of the coronavirus outbreak.

According to Reuters, Brent crude was up $0.46 to $51.58 per barrel. Meanwhile, US West Texas Intermediate (WTI) futures increased by $0.37, to $47.15 a barrel.

Data from an Environmental Impact Assessment (EIA) reported a rise in US crude stockpiles last week. Meanwhile, US oil exports rose to more than four million barrels per day (Mbpd) for the first time since December last year.

CMC Markets analyst Margaret Yang said crude oil prices were boosted overnight by a broadly positive outlook. She also explained and data showing crude oil inventories to be lower than expected.

She said: “The market is also anticipating a decent output cut to be carried out by OPEC+, as Covid-19 has brought a significant impact to world’s energy demand. More production curb is needed to shore up crude prices.”

Ministers of the Organization of the Petroleum Exporting Countries (OPEC) will meet in Vienna over Thursday and Friday. They plan to discuss cutting their oil output, before meeting with Russian officials to convince them to do the same.

Saudi Arabia plans to further increase existing cuts. The country has decreased production by one Mbpd until June, but will propose continuing these cuts to the end of 2020. Officials will also make the case to cut a further 500,000 barrels per day until June.

Stockbroker OANDA senior market analyst Edward Moya said: “If OPEC+ settles with something in the middle of the Russian request of no change in cuts and the 1.5 million Saudi goal, that might not be enough to keep prices supported here.

“OPEC+ needs to send a strong message and anything below one million barrels in deeper production cuts will send oil prices sharply lower.”

Geopolitical tensions in the Middle East also contributed to oil prices, along with the continuing blockade of Libyan exports.