The world’s oil market once fixated on how Saudi-led Opec would tweak supply in small increments to boost prices. That concern suddenly feels quaint: the size of the global drop in consumption triggered by the coronavirus pandemic may be equivalent to the cartel’s entire output.
Saudi Arabia has pledged to ramp up exports as part of its price war, but the collapse in demand will compel other producers both within and outside Opec’s 13 members, to leave lossmaking supplies in the ground.
Demand is now down by as much as a quarter, or roughly 25m barrels a day. That is close to what Opec countries produce every day, or as if the US, Mexico and Canada had abruptly stopped consuming oil altogether. Storage facilities will soon be overwhelmed, say analysts, unless the industry can find a way to cut output at a scale never managed before.