OPEC Plays Russian Roulette

6 March 2020:

OPEC is trying to balance the market as oil demand stagnates

Another OPEC meeting brings discussion about another production cut.  OPEC proposed yesterday to cut production by another 1.5 million barrels per day (Mb/d) through the end of 2020.  However, the implementation of this proposal was contingent on the participation of Russia and the other non-OPEC members that have been coordinating with the group in recent years. 

At the time of writing of this opinion it seems that Russia is not onboard with this plan.  If implemented, the proposed production cuts would come on top of the previously agreed reduction of 2.1 Mb/d by OPEC+, including a voluntary 400 Kb/d by Saudi Arabia.  Under this scenario, OPEC production will fall to levels not seen since 2003, when global oil demand was at 80 Mb/d, 20 Mb/d (20%) below current demand. 

The alternative scenario is that OPEC and Russia cannot reach agree and there will be no cuts.  What will be the potential impact on the tanker market of the alternative outcomes of the OPEC meeting?

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