Brent crude could plunge to ‘single-digit lows’ if OPEC+ can’t agree on output cuts - Fitch

CNBC reports that according to Fitch Solutions forecasts Brent crude futures could plunge to "single-digit lows" if major oil producers fail to reach a deal to cut output at a time when demand has collapsed due to the coronavirus pandemic.

The Organization of the Petroleum Exporting Countries and its allies are expected to meet on Thursday - a delay from Monday - in an attempt to agree on production cuts. A previous deal by the group - commonly known as OPEC+ - expired in March after Saudi Arabia and Russia failed to reach an agreement. The fallout sent oil prices plummeting to multi-year lows.

The expiry of the deal means that producers are free to increase output this month, with Saudi Arabia, United Arab Emirates and Russia among those saying that they would do so.

Analysts from Fitch Solutions said a fall in demand and an increase in supply could result in more than 20 million barrel per day of excess oil. That would put the oil market under "extreme physical pressure," they wrote in the report published before the OPEC+ meeting was postponed.

"While it is unlikely that nominal storage capacity will be breached, it is possible that the sheer scale of the oversupply will overwhelm global logistics chains, plunging Brent into single-digit lows," the analysts added.