A pivotal day for crude oil

A pivotal day for crude oil

Commodities 5 minutes to read
Ole Hansen

Head of Commodity Strategy

Summary:  Can Opec come up with enough of a production cut to bring oil bulls back into the ring?


Today could prove a pivotal day for world oil markets as Opec ministers prepare to meet in Vienna to discuss the 30%-plus slide in oil prices since October. 
The schedule is as follows (you can keep updated on its progress via the #OOTT hashtag on Twitter):

• 10:00 CET: open session with media (delayed)
• 11:00 CET: closed session
• 13:00 CET: press conference


Opec needs to cut production by somewhere between 1 and 1.5 million barrels/day in order to remove the overproduction seen in recent months after the US allowed eight countries to continue to buy Iranian oil. 
Production
Given the depressed sentiment across markets today following the Huawei CFO arrest, any failure to do so risks sending Brent crude oil lower towards $50/barrel. A solid reduction with Russia on board could see the market move swiftly back towards $70/b.
Brent crude
Source: Saxo Bank
Russia took part in a meeting of the Joint Ministerial Monitoring Committee of the Opec+ group yesterday, with Opec+ reportedly considering two options: 

A total cut of 1 million b/d if Russia contributes 150,000 b/
A total cut of 1.3 million b/d or more if Russia contributes 250,000 b/d

In my view, and as communicated to Bloomberg, the current sentiment in the market is so poor that any disappointment could send oil sharply lower. The Sino-US trade war ceasefire seems to have been broken already, and that raises some questions about demand.

If Opec can agree on a supply cut, Russia may “verbally” join, but it could find curbing output difficult considering the nation’s lowering of oil and product export taxes from the New Year.

Trump weighing in once again yesterday has left Saudi Arabia with the tough choice of being hit by Trump or being hit in the pocket.

In markets today, we see Brent continuing to tank with prices down 5% before bouncing a bit as the closed meeting begins. The further weakness was driven by comments from the UAE forecasting risks to demand in 2019 at a time of rising non-Opec production. Additionally, we saw the Saudi oil minister out saying that a 1 million b/d cut could be the most bullish outcome, a figure that the market clearly finds insufficient.

Quarterly Outlook

01 /

  • Equity outlook: The high cost of global fragmentation for US portfolios

    Quarterly Outlook

    Equity outlook: The high cost of global fragmentation for US portfolios

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: Commodities rally despite global uncertainty

    Quarterly Outlook

    Commodity Outlook: Commodities rally despite global uncertainty

    Ole Hansen

    Head of Commodity Strategy

  • Upending the global order at blinding speed

    Quarterly Outlook

    Upending the global order at blinding speed

    John J. Hardy

    Global Head of Macro Strategy

    We are witnessing a once-in-a-lifetime shredding of the global order. As the new order takes shape, ...
  • Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Quarterly Outlook

    Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Jacob Falkencrone

    Global Head of Investment Strategy

  • Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    Quarterly Outlook

    Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    John J. Hardy

    Global Head of Macro Strategy

  • Equity Outlook: The ride just got rougher

    Quarterly Outlook

    Equity Outlook: The ride just got rougher

    Charu Chanana

    Chief Investment Strategist

  • China Outlook: The choice between retaliation or de-escalation

    Quarterly Outlook

    China Outlook: The choice between retaliation or de-escalation

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: A bumpy road ahead calls for diversification

    Quarterly Outlook

    Commodity Outlook: A bumpy road ahead calls for diversification

    Ole Hansen

    Head of Commodity Strategy

  • FX outlook: Tariffs drive USD strength, until...?

    Quarterly Outlook

    FX outlook: Tariffs drive USD strength, until...?

    John J. Hardy

    Global Head of Macro Strategy

  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy


Business Hills Park – Building 4,
4th Floor, office 401, Dubai Hills Estate, P.O. Box 33641, Dubai, UAE

Contact Saxo

Select region

UAE
UAE

All trading and investing comes with risk, including but not limited to the potential to lose your entire invested amount.

Information on our international website (as selected from the globe drop-down) can be accessed worldwide and relates to Saxo Bank A/S as the parent company of the Saxo Bank Group. Any mention of the Saxo Bank Group refers to the overall organisation, including subsidiaries and branches under Saxo Bank A/S. Client agreements are made with the relevant Saxo entity based on your country of residence and are governed by the applicable laws of that entity's jurisdiction.

Apple and the Apple logo are trademarks of Apple Inc., registered in the US and other countries. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.