- Even if OPEC slashes production by 600K barrels per day, the price of oil “could still be weak in March and April, before it improves in the summer,” said Kang Wu, head of Asia analytics at S&P Global Platts.
- “A lot of inventory build up right now needs to be absorbed in April” amid lower crude demand due to the coronavirus outbreak.
- Prices have been under pressure due to the closure of many parts of the Chinese economy, while the virus has forced flight cancellations across the globe.
According to a senior analyst at S&P Global Platts, even if OPEC cuts production by 600,000 barrels a day, oil prices could remain weak until April, writes Sam Meredith for CNBC.
That’s because inventories are rising amid lower oil demand due to the coronavirus outbreak, Kang Wu, Asia’s head of analytics, told CNBC’s “Capital Connection” on Thursday.
Gloomy trade scenario
Oil prices have been under pressure because of the virus that shuttered Chinese businesses for weeks and forced flight cancellations around the world.
As the economic impact of the coronavirus unfolded, the Organization of the Petroleum Exporting Countries slashed its global oil demand outlook.
For China, where the outbreak began, OPEC revised its demand forecast down by 0.2 million barrels a day for the first half of the year.
International benchmark Brent crude futures were at $52.81 a barrel, down 1.16% on Thursday afternoon in Asia, while U.S. crude futures fell 1.33% to $48.08 a barrel.
OPEC’s Joint Technical Committee met over three days in early February and reportedly recommended a cut of 600,000 barrels a day, according to Reuters.
Possible betterment in Summer
That’s what S&P Global Platts expects at the March 5 and 6 OPEC meeting, Wu said. “Saudi Arabia is the key player, they’re already over compliant,” he said.
He added, “So the 600,000 barrels a day will add to that supply constraint, will lend some support to the market.”
However, the current buildup in inventories may need to be absorbed in April, he said. “In terms of prices, (the market) could still be weak in March and April, before it improves in the summer.”
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Source: CNBC
