MOSCOW (Pakistan Point News / Sputnik - 02nd April, 2020) Oil market volatility may further deepen this month after the OPEC+ deal on oil output cuts officially expired Wednesday, pushing global crude prices even lower amid the coronavirus crisis.
Oil prices first plummeted in early March after OPEC+ exporters failed to agree on additional cuts or extend the deal limiting their production, dealing a blow to the market weakened by a fall in demand during the pandemic.
In particular, the outbreak has significantly reduced air traffic worldwide, while most employees have switched to working from home, driving demand for jet fuel and gasoline downward. On top of that, many factories in China and Italy,�among other countries severely hit by the COVID-19, have been shut.
This week, the International Energy Agency (IEA) Chief Fatih Birol said that 3 billion people globally were under a lockdown, which could push the energy demand down by 20 million barrels a day.
Saudi Arabia and Russia failed to reach a deal on oil production cuts at the March meeting, triggering an oil price war, with Riyadh vowing to flood the market with oil and reportedly starting offering barrels to European customers at huge discounts.
The IEA chief said that oil supply may rise by 3 million barrels per day as a consequence of the oil war and called on Saudi Arabia to be more responsible and "provide a constructive support to the stabilisation of the global oil markets."
The standoff caused Brent oil futures to end their worst quarter in decades this week, losing over 65 percent of their value since the beginning of 2020. On Tuesday, May Brent crude futures traded at $22.74 per barrel. Russian crude blend Urals fell to $13 per barrel on Monday, its lowest price in more than two decades.�
HOPES FOR NEW OPEC+ DEAL REMAIN�
Even though tensions on the oil market are running high, there is still a chance that the leading oil producers will agree to some measures designed to mitigate the crisis.
Russian President Vladimir Putin told the government on Wednesday that he was in talk on oil prices with OPEC and the United States. He said that key players should come up with a solution that would stabilize the energy market.
At the same time, US President Donald Trump said that Russia and Saudi Arabia were holding consultations about the oil price slump and that the United States might join them at an appropriate time.
As of now, Saudi Arabia continues to ramp up production. The state-owned petroleum monopoly, Saudi Aramco, exported a record 18.8 million barrels on Wednesday. This means that energy prices are unlikely to recover in April, which puts even more pressure on the market and its key players.
