Imagine U.S. President Donald Trump makes a deal with Saudi Arabia and Russia to cut oil production. Envisage Washington, Moscow and Riyadh going big, each cutting by one million barrels a day. Bullish, right? Now come back to the reality of today’s oil market, where demand is collapsing — some traders say by 10 to 20 million barrels a day, or a fifth of global consumption — as millions find themselves in lock-down or self-isolating, causing travel to grind to a halt. “Demand has been decimated in the short term,” said Andy Hall, one of the most successful oil traders of his generation until he retired from day-to-day trading in 2017. It’s a widely held view among senior executives in the market.
Since dropping below $25 a barrel this week, an 18-year low, Brent crude has swung violently, with investors trying to assess the impact of OPEC+ output increases against falling demand due to measures to contain Covid-19. On four occasions in the past two weeks, Brent posted daily price swings of more than 10%.