Anticipations that the OPEC Plus alliance will further impose production cuts put a cap under last week's 17 percent drop in prices of oil, with futures in New York bouncing back even as the spread of coronavirus showed no signs of abating.
OPEC could agree on more oil inventory cuts in the coming days -- with or without Russia's backing -- to stop the plunge in crude prices sparked by the virus, analysts said.
Moscow is not comfortable with the looming cuts, arguing that reduced output by the Saudi Arabia-led OPEC and its member states will not necessarily resuscitate demand for the precious commodity, analysts noted.
"I want to point out that for Russia's current budget, the current oil prices level is acceptable," Russian Leader Vladimir Putin told a meeting with the country's energy ministers and oil producers to discuss OPEC's stance and its implications. However, Putin also bared it was not easy to outline future moves in oil prices and his government needs to be prepared for various outcomes.
The price of Brent crude was down to $50.04 on Friday, its lowest since late 2018 on jitters, the virus epidemic will hit global demand for oil very badly.
Russia's stance acted as a brake of sorts on falling prices of crude after China's manufacturing gauge posted over the weekend came in at a new low, underscoring an already faltering estimate and highlighting the the rising economic effect of the current health crisis.
The rebound in oil came in the midst of a broader recovery from last week's collapse, with Asian shares climbing and commodities from soybeans to ores showing decent gains. Still, steep swings in oil in Asian trading -- from a decline of 3.1 percent to a slight increase of 3.6 percent -- showed the extent to which the virus is disrupting markets.
According to sources, Saudi Arabia wants to keep oil prices from spiraling, but the Russians are still not giving their consent. So the only way might be for OPEC to implement the cuts by itself, which may not send a good signal to the global markets.
Meanwhile, global oil consumption may not increase at all in the coming months, according to a rising minority of investors and market experts. While economic stimulus in China and elsewhere may boost demand in the next three months, it is unlikely to totally offset the current impact on consumption. Against this backdrop, OPEC Plus will meet on Thursday and Friday in Austria to decide their next move.
