The price of oil has recently been under enormous pressure due to fears over how much demand for oil will fall after the outbreak of the virus in China. The reduction of travel along with the reduction of production reduced China's demand for oil by about 20 percent, which led, among others to close or limit crude oil processing at local refineries.
At that time, the price of a barrel of WTI oil fell by more than 20 percent, crossing the USD 50 round level at some point. In practice, this meant reaching the lowest level since the beginning of 2019, which alerted the OPEC countries and their allies, which are not on the go with such a significant fall in prices and unable to balance oil-based budgets. From that moment on, it was increasingly wondered when the cartel and its allies, including Russia, would react.
OPEC + will meet in this matter on March 6 – said a representative of the Russian Ministry of Energy quoted by the media. Markets, in turn, have been counting on the cartel to limit production for several days to offset the decline in demand in China through the outbreak of the epidemic. China is the world's largest importer of crude oil, hence OPEC + may want to prevent a large supply overhang after a fall in demand. In addition, the sustainability of the fall in demand for oil and when a demand recovery could be an important issue.
Today, the price of oil could also be supported by Tuesday's US decision to blacklist trading subsidiary of Russia's Rosneft which according to President Donald Trump's administration, is a financial lifeline for the Venezuelan government. The United States has imposed sanctions on Rosneft Trading SA, a subsidiary based in Geneva.
Macroeconomic data related to crude oil stock change may also be important for the oil market. Today after 22:40 API will publish the data about crude oil stock change in the last week. Market consensus assumes a drop in inventories by -1.1 million barrels.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
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