The Organization of Petroleum Exporting Countries (OPEC) and non-OPEC players
(such as US and Russia) are scheduled to commence discussions at 7pm Pakistan
Standard Time today, to discuss the possibility of a coordinated production cut. The
cut is expected to move the curve closer to the demand-supply equilibrium and
support the commodity’s prices.

▪ The discussion between the OPEC and non-OPEC players, collectively referred to as
OPEC+, along with the United States, are expected to be around the possibility of
cutting production by 10-15 MN BPDs.

▪ Ahead of the meeting we present different possibilities:
Best case scenario-Agreement reached: Saudi Arabia, Russia, and the United States
agree to cut output by the stipulated amount (10-15 MN BPDs) amongst the three
countries—more in line with the projected subdued demand (down 15-20 MN BPD,
globally). This is expected to provide stimulus to international crude oil prices, with
prices moving north of USD 40/BBL.

Worst case scenario-No agreement: In anticipation of a possible agreement being
reached between the three countries, crude oil prices have seen strength recently
(WTI/Brent up 6.2%/3% yesterday). In the event of talks falling apart, it is highly
likely that an even worse price war between Saudi Arabia and Russia would ensue,
pulling the prices under USD 20/BBL.

To recall, after earlier talks fell apart, Saudi Arabia announced that it will continue
to produce ~12 MN BPD of crude oil, sending WTI and Brent futures trading down
by 24% and 31%, respectively, on March 18, 2020. Hence, a disagreement between
the countries today could trigger a similar price action on the commodity.

What led us here:
▪ Subdued economic activity, air travel restrictions, and lockdowns around the world,
among other factors, are expected to dent the demand for petroleum products and
crude oil.

▪ According to Vitol—the world’s largest oil trader—the demand for crude oil is
expected to drop as much as 15-20 MN BPD, while on an annual basis the demand is
expected to be dented by 5 MN BPD, as the global curve flattens.

▪ The supply glut has taken its toll on international crude oil prices. Since the beginning
of March this year, WTI and Brent have lost 42% and 34%, respectively