Reuters is quoting sources within OPEC as saying that the cartel wishes to extend its production cuts at least to June, with deeper cuts also being on the cards if demand falters.
The development has apparently been triggered by the rapid decline in oil prices based on concerns that the spread of the new coronavirus in China could hinder economic growth and oil demand growth with it.
For their part, OPEC members tried to calm markets by dispelling notions that the new virus would excessively hit the world economy and oil demand. At the same time, however, OPEC officials are already discussing internally how to react to the developing situation.
According to one source, much will depend on how the Chinese virus affects the oil markets over the coming week and whatever clarity starts to emerge, summing it up by saying:
“A further extension is a strong possibility and a deeper cut is a possibility.”
Another source confirmed the high likelihood of an extension of the cuts until June, along with the option of a further extension until the end of the year and the possibility of deeper cuts if warranted. Prince Abdulaziz bin Salman, the Saudi Energy Minister, also stated recently that all options were on the table.
Many other non-OPEC producers are expected to grow their output, however, such as the United States, where oil companies behind lubricant makers like Castrol and Mobil continue to exploit tight formations. OPEC therefore expects its world market share to further decline over this year.