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OPEC agreement collapses and takes oil price with it

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09 March 2020

OPEC agreement collapses and takes oil price with it

Report summary

On 6 March 2020, the OPEC+ group failed to reach agreement to extend production restraint beyond the end of this month. The previous day OPEC agreed to a proposal calling for an additional 1.5 million b/d reduction in supply through at least Q2 2020. Russia rejected the plan and with that, the group dis-banded without an official statement. In response, on 8 March, the Saudis announced a steep $4 to $8 per barrel reduction in April’s Official Selling Prices (OSPs). These cuts are seen as the start of a price war and Brent has moved to $34 as other markets also fell on 9 March due to fears about the spread of the COVID-19 virus. Highlights of our initial market analysis include: • The effect of these events on short-term oil market fundamentals • A forecast for Brent in Q2 2020 based on our assumptions • How will US supply behave? • Assessment of global breakeven prices

Table of contents

  • Effect on the oil market and fundamentals
  • Demand won’t be spurred by low oil prices
  • Russia opts out of OPEC proposal
  • US Lower 48- crucial lever in global market

Tables and charts

This report includes 1 images and tables including:

  • Global future resource cost curve

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    OPEC agreement collapses and takes oil price with it

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