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As we head towards the March 5th and 6th OPEC+ meeting in Vienna, here is a focus on the price of oil which has been in freefall. The Financial Times reports that Saudi Arabia is asking producers, including Russia, for a production cut of an additional 1m barrels per day. 

Saudi Arabia and Russia have so far failed to reach an agreement to cut oil production despite the coronavirus epidemic in China, Italy, S.Korea and counting, expected to significantly hurt energy demand this year.

This has been putting the more than three-year-old alliance between the two major oil producers at risk considering Saudi Arabia has been weighing a break in its alliance with Russia. There had been reports that the Saudis are holding talks with Kuwait and the United Arab Emirates this week to discuss a possible joint production cut of as much as 300,000 barrels a day.

Market implications

The price of oil has been stabilising following a 15.74% sell-off since 20th Feb from $54.45 to a low of $45.91. A correction in risk next week would likely see speculative mean reversion trades piled into the market, although investors will be wanting to see the outcome of next week’s OPEC+ meetings before fully committing, as well as some positive developments in the coronavirus headlines. For more analysis in oil, see here.