Oil Price up as Opec Talks Continue

The benchmark Dated Brent crude contract, for prompt delivery, was up 3.7% at time of press [16.30 GMT April 9] at $34.06/barrel, amid growing confidence that the world's biggest producers will be able to strike a deal on output cuts. The US counterpart, West Texas Intermediate (WTI), was up 3.8% to $26.04 /b. However the contracts had come off their earlier peaks.

Talks were continuing and there will be a meeting of G20 ministers April 10, after which more clarity on the cuts is expected.

Whether the world's biggest producers will agree a big enough cut to match the expected decline in demand caused by the Covid-19 crisis is another matter. Experts have warned of a drop in global oil consumption of between 15 and 22mn b/d this month. Opec and Russia have insisted before that the US must be involved in a deal, although Washington has so far been non-committal.

US and Russian officials have spoken earlier this month of a 10-15mn b/d reduction in output. But Opec and other producers are now discussing a cut of up to 20mn b/d, Reuters sources claimed earlier in the afternoon. 

According to Norwegian consultancy Rystad, the more widely quoted agreement for a 10mn b/d cut might be enough for most producers to survive through the second quarter of 2020 and avoid what it called the 'storage wall' – when production exceeds storage as well as consumption capacity.

But it warned that "is only the case if cuts are implemented within a matter of days rather than weeks, which is unlikely to be the case in practice." It said that if crude storage were to reach physical limits, "we can expect crude prices to dive into a deep abyss."