OPEC+ to reconvene to navigate crude market volatility

LONDON: The OPEC+ grouping of oil producers will hold its third ministerial summit of the year via videoconference Thursday to discuss output cuts in the face of fresh price volatility.

"The expectation is that the group will hold production steady also in May given current physical oil market weakness," according to Bjarne Schieldrop, analyst at SEB.

However, he added that "Russia and Kazakhstan are likely to lift production yet another notch and the group in total is probably fine with that."

The OPEC cartel's largest producer is Saudi Arabia but the OPEC+ grouping also includes Russia, which produces even more crude oil.

Under its current agreement the OPEC+ group is enforcing a drastic output cut, meaning seven million barrels that could be shipped to markets every day are being left in the ground. The aim has been to avoid oversupplying a market suffering from a collapse in demand due to the coronavirus pandemic.

Without the production cuts, limited storage capacity could be saturated and the danger of a fall in prices -- currently hovering around $60 per barrel -- is real.

Indeed, the two benchmark contracts, American WTI and Europe's Brent, have undergone a drastic price correction in recent weeks and have been subjected to fresh price instability over the last few days, a sign of serious market tension.