The meeting in Vienna last week among OPEC members and their non-OPEC allies, OPEC plus, was intended to help nations reach an agreement on production cuts to extend past the current end date of April 1.
OPEC plus is currently operating on a reduction of 2.1 million barrels per day in oil production, and that lasts until April 1. OPEC proposed Thursday in Vienna to extend that cut by 1.5 million barrels per day and have it run until the end of 2020.
Oil prices had already fallen 20% since the start of the year, encouraging oil producers to push for more production cuts. The concern is the spread of the coronavirus will drive down the price further as economic activity, and in turn, oil demand, slows around the globe.
But Russia was not on board.
The Saudis' response to Russia's stance was to cut its price to Chinese customers, and plan to increase production by as much as 2 million barrels per day.
That fallout then led to oil's massive 30% nosedive. And on Monday, oil's decline was literal fuel to the stock market fire.
A market already suffering from news of the further spread of COVID-19 dropped 7.79% in one day and a total of 19.3% since Feb. 12.
Since Monday's losses, both oil and the stock market have recovered a bit. Oil is sitting at around $33 a barrel, and stocks rallied at open.
Unless there's a resolution, we will be retesting the market lows that we experienced in 2015 and 2016, when oil dipped below $30 per barrel.
About the Author
Dr. Kent Moors is an internationally recognized expert in oil and natural gas policy, risk assessment, and emerging market economic development. He serves as an advisor to many U.S. governors and foreign governments. Kent details his latest global travels in his free Oil & Energy Investor e-letter. He makes specific investment recommendations in his newsletter, the Energy Advantage. For more active investors, he issues shorter-term trades in his Energy Inner Circle.