OPEC Working on Additional 1.5mbpd Cut

• OPEC Working on Additional 1.5mbpd Cut

The Organisation of the Petroleum Exporting Countries (OPEC) on Thursday has agreed to cap production by another 1.5 million barrels per day in the second quarter of the year to boost falling oil prices.

The agreement, however, was conditional as Russia was yet to agree to the suggestion led by Saudi Arabia. Russia had said it favours further extension of the current 2.1 million barrels per day cut due to expire in March 2020 but may not agree to a deeper cut.

According to Reuters sources, the 14-member group led by Saudi Arabia agreed on Thursday that an additional 1.5 million barrels per day cut would help curtail falling oil prices as global demand for the commodity wanes with fast-spreading coronavirus.

Analysts doubt anything less than 1 million barrels per day cut would prop up prices given the fact that around that number has already been priced into the market by traders.

Amrita Sen, a chief oil analyst and co-founder, Energy Aspects, on Thursday said she was 100 percent certain that any cut below 1 million barrels per day, markets would sell-off.

“We’ve already seen Brent test $50 (per barrel) last week and I think people are expecting an OPEC action. I would say a million (bpd cut) is probably priced-in right now. Anything less, or even around that, will sell off,” she said. “If they fail to deliver, I think we’ll test thirties (oil at $30 a barrel).”

Brent crude oil, against which Nigerian oil is priced, declined further on Thursday to $51.22 per barrels, down from $56.97 it traded on February 25th.

“Our expectation is that OPEC+ will deliver a credible and coherent strategy that will take more barrels that what’s priced into the market off the table,” said Ehsan Khoman from Mitsubishi UFG.