Month in brief

• Date: 01 April 2020
• Published date: 01 April 2020
• DOI: http://doi.org/10.1111/oet.12766

THE MONTH IN BRIEF

Month in brief

March 2020 will go down as the most traumatic month

for the oil and gas industry in many years, with prices

falling to their lowest levels since 2003.

Brent began at $51.9/bbl on 2 March, with sentiment

fairly well balanced as OPEC-plus appeared ready to

implement a cut of at least 1 mn bpd to help balance

lower demand as a result of the COVID-19 corona virus.

A surprise interest rate in the United States also helped

support prices, which saw little change in the first few

days of the month. By Thursday 5 March, OPEC, led by

Saudi Arabia, was proposing a 1.5 mn bpd cut among

OPEC-plus members (above the existing 1.7 mn bpd

cuts), but needed agreement from Russia. The following

day the talks collapsed, with Russia refusing to support

deeper cuts, leading to the sharpest 1-day fall in prices for

5 years.

The following Monday, front month Brent began the

week at $45.37/bbl, before tumbling by over $10/bbl to

under $35/bbl (among the biggest oil market price falls ever)

as the full implications of the failed deal became clear—

including the effective demise of the OPEC-plus grouping

and an all-out battle for market share. Saudi Arabia indi-

cateditwouldboostoutputbyupto3to12.3mnbpdand

slash official selling prices, while Russia said it could cope

with $25 to 30/bbl oil for many years and would raise output

by 500 000 bpd. All the while, the demand outlook was

deteriorating due to corona virus expansion.

The sharp prompt price fall reversed a market back-

wardation, with prompt prices dropping below future

levels. Tuesday 10th saw a slight bounce on news that

negotiations between Saudi Arabia and Russia may

resume, while Iraq attempted to restore some order

within OPEC and oil companies began announcing cost

and capex cuts. But with little sign of any move towards a

deal, and indications that Saudi and Russia both saw the

events as an opportunity to grab market share by putting

more expensive producers out of business (particularly in

the US shale sector), prices then edged down further.

There was a slight recovery on the Friday as the United

States announced it would buy to fill strategic stocks, and

Brent ended the week at $33.85/bbl.

There was more to come the following week, as prices

fell further on growing concern that Saudi Arabia would

flood the global market with oil, alongside smaller Gulf

producers such as Oman and the UAE. Aramco indicated

exports would rise to over 10 mn bpd over coming

months, up 3 mn bpd from recent levels, into a shrinking

market. By the close on Wednesday 18 March, Brent had

dropped to $24.88/bbl—the lowest since 2003. Prices then

rebounded following comments that the United States

would intervene at the “appropriate time”and that out-

put cuts could be imposed on US shale.

In the final days of March, attention switched back to

the growing impact the virus is likely to have on eco-

nomic activity and oil demand—which began to look

likely to dwarf any change in OPEC-plus supply. By then,

casualties from the virus had risen above 35 000, infec-

tion rates above three quarters of a million, while quar-

antines were affecting a third of the world's population—

sending estimates of the (temporary) impact on demand

as high as 20 mn bpd. This kept downward pressure on

crude prices, with Brent dipping to the low $20 s/bbl in

the last few days of the month—down almost $30/bbl, or

well over 50%, on the month.

How to cite this article: Month in brief. Oil and

Energy Trends. 2020;45:6. https://doi.org/10.1111/

oet.12766

DOI: 10.1111/oet.12766

6© 2020 John Wiley & Sons Ltd Oil and Energy Trends. 2020;45:6.wileyonlinelibrary.com/journal/oet