The price of Brent crude surged by 30% this week after President Trump suggested that Saudi Arabia and Russia were close to agreeing an eye-watering 15m bpd output cut to combat COVID-19’s hit to global oil demand. We suspect markets may have over-reacted. An output cut has not been agreed yet and, even if it is, we estimate that the market will remain in a large surplus in Q2.
Turning to next week, the outcome of Monday’s OPEC+ meeting will be the key driver of prices. Given that the oil market is now expecting a large reduction in output, anything less could send prices into freefall. Otherwise, with the number of global coronavirus cases topping one million this week, market attention will remain squarely fixed on any signs that the spread of the virus is starting to slow.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to gain:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services