OPEC+ supply cuts fail to stabilise oil prices amid Covid-19
Oil prices are trading lower as OPEC+ supply cuts fail to offset declining demand caused by the coronavirus pandemic.
OPEC+ supply cuts fail to support oil prices amid weakening demand due to Covid-19 pandemic.
Brent crude is trading 2% lower at $30.95 a barrel as of 15:10 (GMT) on Tuesday, while the US West Texas Intermediate (WTI) is also down 2% at $21.75 a barrel.
OPEC and allies led by Russia, more commonly referred to as OPEC+, held talks last week and agreed on Sunday to reduce global supply by up to 20%.
OPEC+ agreed to remove 9.7 billion barrels of oil per day (bopd) from the market at the start of May, with the supply cuts remaining in place until the end of July. After this date, the organisation plans to relax supply cuts to 7.7 million bopd until the end of the year.
Supply cuts will not offset declining demand for oil
Despite OPEC+ reducing supply in an effort to strengthen oil prices, forecasters contend that the measures will do little to offset declining demand, especially when analysts predict a 23 million bopd supply overhang in April.
Oil prices have fallen by 50% since the start of the year and global demand forecasts are down by 30%, raising eyebrows about the efficacy of the OPEC+ supply cuts ability to support oil markets.
‘Ultimately, the size of the demand shock is simply too large for a coordinated supply cut,’ analysts from Goldman Sachs said in a note last week.
Oil could hit $45 a barrel in 2020, Gazprom CEO says
The price of oil could rally as high as $45 a barrel this year if the US ease national lockdowns and demand improves, according to Gazprom Neft CEO Alexander Dyukov in an interview with Russian newspaper Kommersant.
Dyukov was quick to add, however, that for oil prices to rise to that level it would require global economic activity to rebound significantly in the second half of the year, especially with demand so low amid the coronavirus outbreak.
How to trade commodities with IG
Create an IG Trading Account or log in to your existing account
Enter ‘Brent Crude’ in the search bar and select it
Choose your position size
Click on ‘buy’ or ‘sell’ in the deal ticket
Confirm the trade
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
Speculate on commodities
Trade commodity futures, as well as 27 commodity markets with no fixed expiries.1
- Wide range of popular and niche metals, energies and softs
- Spreads from 0.3 pts on Spot Gold, 2 pts on Spot Silver and 2.8 pts on Oil
- View continuous charting, backdated for up to five years
Live prices on most popular markets