On March 6, U.S. WTI crude oil futures market plummeted, with major contracts down $4.62, to $41.28/ barrel. Brent crude oil futures market prices plummeted, the main contract was $45.27/ barrel, down $4.72. Brent crude oil and US WTI crude oil both fell by more than 9%, as a result of the serious disagreement between Saudi Arabia and Russia on the production reduction agreement at the OPEC ministerial meeting in Vienna, which led to a sharp drop in crude oil prices.
OPEC held a ministerial meeting on March 6, and decided to recommend that OPEC and non OPEC oil producing countries implement an additional reduction of production of 1.5 million barrels/ day until the end of this year. At the same time, it proposed to extend the time limit of the current reduction plan of 1.7 million barrels/ day from the end of March to the end of this year. In order to boost the current depressed oil price, Russia did not follow the steps Saudi Arabia expected. Russian energy minister Novak said in an interview after the meeting that since OPEC and non OPEC oil producing countries failed to reach a consensus on how to deal with the next step, from April 1, these countries will no longer be constrained by the production ceiling or production reduction. This speech makes OPEC+, which is not a monolithic one, fall into a situation of collapse.
On March 6, Saudi Arabia's next act was the trigger for another sharp drop in oil prices. According to a source on Sunday, Saudi Arabia said it plans to increase its crude oil production to more than 10 million barrels/ day in April after the current production reduction agreement expires at the end of March. Saudi Arabia, which has no illusions about Russia, decided to trade price war for more market share, or have market speculation, in order to push Russia to the negotiating table. Subsequently, Saudi Arabia lowered its April OSP prices in all markets by $6-8/ barrel, the largest discount in more than 20 years, to attract foreign refineries to buy Saudi Crude Oil, and oil prices plummeted. Brent crude oil futures fell 21.2% to $35.69/ barrel at 08:07 Beijing time. WTI crude oil futures fell 21.4% to $32.44/ barrel.
According to SunSirs, the collapse of OPEC+ cooperation has led to a punitive drop in oil prices. Originally affected by COVID-19, the global demand for oil prices in 2020 is expected to generally cool down, and major institutions have lowered their growth expectations for this year's crude oil, and Goldman Sachs' forecast has been cut in half. In particular, the global spread of COVID-19 is becoming more and more serious. Previously, the market generally hoped for the deepening of OPEC+ production reduction, but the collapse of OPEC+ negotiations and Saudi Arabia's price war crushed the oil price. At present, the market bulls have been defeated, and there is no substantial positive news. The oil price is still likely to bottom in the short term. At present, the market still needs to pay close attention to the trend of OPEC and the development of epidemic of COVID-19.
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