Oil could dive below $10 if OPEC & allies fail to agree production cut deal, warns Fitch

The oil market could be put under "extreme physical pressure" if major global oil producers fail to reach a deal to cut output, Fitch Solutions has said.

According to the agency's report, a fall in demand and an increase in supply could result in more than 20 million barrels per day of excess oil.

"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," Fitch analysts said.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies are expected to meet on Thursday after having postponed their Monday video meeting. Their previous deal expired in March after Saudi Arabia and Russia failed to reach an agreement. The fallout sent crude prices plummeting to multi-year lows.

According to the CEO of Russia's wealth fund, Kirill Dmitriev, Moscow and Riyadh are "very close" to striking a deal on oil production cuts. 

He pointed to comments by Russian President Vladimir Putin, who last week proposed a combined production cut of 10 million barrels per day.

Meanwhile, American President Donald Trump threatened to impose "very substantial tariffs" on oil imports to the US if the crude price stays the way it is. 

Oil was trading down on Monday after the delay of OPEC+ talks, with Brent sliding almost two percent to $33 per barrel. US crude benchmark WTI dropped 3.7 percent to around $27 a barrel.

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