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Oil price barrels ahead as OPEC flags meeting

By AFP - Apr 04,2020 - Last updated at Apr 04,2020

An oil tanker at the port of Ras Al-Khair, about 185 kilometres north of Dammam in Saudi Arabia's eastern province overlooking the Gulf. ( AFP photo)

LONDON — The price of crude oil surged again on Friday after the Organisation of the Petroleum Exporting Countries (OPEC) said it would talk to non-members, notably Russia, giving investors hope that they will stop a price war which has created market chaos along with crushed demand because of the coronavirus.

 

      The Saudi-led OPEC group of oil producers and their allies will meet on Monday via video conference, a source close to the cartel said.

 

      "There's certainly a lot of optimism that a deal is going to be done," OANDA analyst Craig Erlam told AFP.

 

      Global stock markets fell following another set of devastating American employment numbers, gloomy eurozone services data and news that the number of declared COVID-19 infections had hit one million worldwide.

 

      The US economy shed 701,000 jobs in March amid the damage inflicted by the coronavirus shutdowns -- several times the market's consensus forecast --  while the unemployment rate surged to 4.4 per cent, the Labour Department reported.

 

     

 

       'Likely to worsen'

     

 

      "The markets are digesting a larger-than-expected drop in March employment, which is likely to worsen on the heels of the past two weeks of spikes in jobless claims that approached the 10 million mark," said analysts at the Charles Schwab brokerage.

 

 

      OPEC's move sparked fresh speculation of an oil production cut, one day after US President Donald Trump sparked a record crude price rally by hinting that Russia and Saudi Arabia planned to end their price war with a sharp reduction in output.

 

      According to a Russian source cited by the TASS agency, US officials have also been invited to take part in the meeting.

 

      "It is in all parties' interests to agree to a significant cut," said Michael Hewson, an analyst at CMC Markets.

 

      But even a 10 million barrels per day reduction "is unlikely to be enough to push prices up much higher from here with demand on the floor", Hewson cautioned.

 

      Friday's oil price surge extended a dizzying recovery seen on Thursday.

 

      In the runup to the upswing, oil prices had plunged this year as the market reeled from the effects of the new coronavirus pandemic, with WTI shedding around 65 per cent of its value in the first quarter.

 

      A price war, triggered last month by Saudi after Moscow refused to tighten oil supply to counteract the sharp drop in demand, added to the bloodbath.

 

     

 

      'Recession knocking'

     

 

      Equity investors remain hostage to uncertainty as they try to gauge the long-term economic impact of the pandemic, which is widely expected to plunge the planet into recession.

 

      "The short-term impact of the coronavirus tragedy is straightforward: a complete shutdown of businesses worldwide is taking a heavy toll on the global economy," Swissquote Bank analyst Ipek Ozkardeskaya told AFP.

 

      "The coronavirus outbreak hits all layers of the population, has had an impact on each and every single business regardless of their size, and paralyzed each and every household regardless of their wealth," she added.

 

      "You do not need to be an economist or an expert to predict a meaningful recession knocking on the door."

 

      Investors hoped that with trillions of dollars pledged in government support, wild volatility seen at the start of the crisis would give way to some form of stability.

 

      But key stock markets in Europe, after posting strong gains last week, posted hefty weekly losses going in the weekend, with US stock markets on track to follow suit.

 

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