OPEC+ Recommends Further Oil Supply Cuts
February 7th, 2020
Energy prices were up in early trading yesterday but eased off those highs after the news hit of mixed signals from OPEC and Russia about whether or not the OPEC+ group would be cutting production. The Joint technical Committee made the recommendation for an immediate 600,000 bpd cut that last until June. This recommendation must be approved by all members of the OPEC+ group and Russia offered some push back. Russia’s Energy Minister, Alexander Novak, said time is needed to assess any impact on oil markets from a new coronavirus. But Russia’s Foreign Minister Sergei Lavrov said the Russia supports recommendations to deepen OPEC+ supply cuts. Mixed signals so we will have to see how this OPEC+ decision shakes out. Also estimates have said that China refineries have already cut throughput by more than 500,000 bpd and that seems to be the reason the committee recommended a 600,000-barrel cut.
The World Health Organization said it was too early to say that China’s coronavirus outbreak was peaking but noted that the country had recorded its first day of a drop in the number of new infections.
Bloomberg reported on Sunday by citing people with inside knowledge of China’s energy industry, that Chinese oil demand had dropped by approximately 3 million bpd, or 20% of total Consumption due to the virus’ impact on the national economy. However, many energy experts have stated that this is just a guestimate at best, since China does not keep energy demand data.
European Central Bank President, Christine Lagarde, said euro zone growth remains modest but there are tentative signs of stabilization, even if the coronavirus outbreak clouds the horizon.
Chines authorities Thursday asked businesses outside Hubei Province to resume operation in an orderly manner while continuing to fight the novel coronavirus outbreak.
The new jobs number just out this morning for January was 225,000 a much bigger number than expected. This is very positive number offering optimism for the economy. But some caution this number is pre the impact from coronavirus so take this cautiously.
The energy markets are currently moving a bit lower on most likely some profit taking into the weekend, we will see how the market end up at the end of the day.