Faced with the epidemic of Coronavirus, the world economy is in full recession. We are witnessing a fall in demand for oil which will therefore translate into a fall in prices if the producing countries do not reduce their production very sharply. The ball is in the court of Russia which drags the feet in front of the call of OPEC.
The virus also makes oil producers tremble. OPEC no longer knows how to convince all producing countries to reduce their production.
Oil is really the barometer of the world economy. This barometer is getting stuck on the word recession. Everywhere, in Europe and in China. And recession, this means a fall in demand for oil and therefore a fall in prices if the producing countries do not reduce their production very sharply. But producing countries fall roughly into two groups. There are the 13 OPEC member countries and there are 10 other countries, including Russia, which are less disciplined. This Thursday, the 13 OPEC countries met to present a united front against the 10 others and convince them to reduce production by 1.5 million barrels per day to stem the collapse of prices.
And is it likely to work?
The ball is in Russia's court dragging its feet. Basically, she would like it to be others who reduce their production, but not her. With an argument: what is the point of reducing production since at the same time, the United States has nothing to do with it and flood the world market with shale oil. We will know during the day if Putin decides to make a move. In the meantime, prices are falling with 24% decline since the start of the epidemic. We are around $ 50 a barrel now. It is very good for motorists but it is a disaster for producers and in the first place Saudi Arabia. We believe that it is very rich but imagine that for the Saudi state budget to be balanced, oil prices must be above 80 dollars. We are very far from that !