Worldwide trade has fallen by 32%, and the best-case scenario - as we hit nearly 1.5 million confirmed cases of coronavirus - is containment by July. At the same time, JPMorgan is predicting a 40% dip in GDP, and the containment of oil producers is proving just as complicated with added political variables.
Fossil Fuels: The Powerlessness of OPEC
As COVID-19 strips global oil demand down to disastrous levels with predictions for worse to come, OPEC is no longer relevant, nor is OPEC+. In this world, the cartel is either global or it is powerless. In fact, the make-or-break deal to end the price war and cut production has come down to the U.S. and Mexico - about as far afield from OPEC as is possible to get. Either there is no more OPEC, or OPEC is now, officially or unofficially, a global cartel.
Realistically speaking, the world would need around 20 million bpd in cuts to even think of changing market sentiment and keeping prices from cascading down further.
Instead, we got a 10-million-bpd cut, starting on May 1, for two months. After that, the production cuts will step down to smaller amounts through April 2022. OPEC set the baseline for the cuts at October 2018 production levels, except for Saudi Arabia and Russia, whose baseline will be 11 million bpd.
It’s a figure that will only partially offset the price war + pandemic oil disaster.
And even this figure is in question because it hinges not on a…