OPEC readies knife for oil demand-slump gunfight – Breakingviews

OPEC readies knife for oil demand-slump gunfight – Breakingviews:

The 13-strong producers club that controls a third of global oil supply meets this week to try to prop up prices smashed by a coronavirus-led demand slump. Good luck with that.

The Organization of the Petroleum Exporting Countries’ chief goal when it meets in Vienna will be to soak up excess oil supply, and thus raise prices, which have fallen by 20% since January. Before the virus emerged, year-on-year demand for oil was expected to rise in the first quarter by at least 1 million barrels per day (bpd). The scale of the slowdown in China has turned that into a 200,000 bpd decline, according to consultancy Rystad Energy. It forecasts millions of barrels of spare capacity this month.

Crude prices have risen 5% this week. That’s partly because of stimulus noises from central banks, but it’s also because OPEC’s de facto leader Saudi Arabia is proposing a 1 million bpd cut on top of the 2.1 million bpd already agreed with allies like Russia in December, when concerns about a weak economy depressed prices. That would take OPEC’s estimated production for the second quarter down to around 28 million bpd, substantially below the 28.9 million bpd that was needed to balance global demand and supply in the fourth quarter.