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.
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.