The next few days could turn out to be action-packed for the crude oil market. A meeting of OPEC and its allies, led by Russia, will be held virtually today at 1200 GMT, i.e 1730 India time. Also on the invited list are representatives from the US, Canada, UK, Brazil, Norway, Argentina, Egypt, Indonesia and more.

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The meeting is expected to work out a coordinated approach to cutting production and reducing the oil surplus in world markets.

The group's failure to strike a deal on output cuts in Vienna last month had sent oil prices into a nosedive and sparked fears of a possible price war.

The US Energy Information Administration has forecast that a high number of COVID-19 cases globally and an increase in oil supply will keep global crude oil prices at multi-year lows during the first half of 2020

Crude oil prices have factored in 10 million barrels per day (bpd) or more of output cut agreement at the end of this meeting. If for some reason the oil producers do not reach a consensus or the cut is less than 10 million bpd, then crude prices could plunge again. The prices could even fall below $20 a barrel, says Paul Hickin of S & P Global Platts.

Even as the output cut is being discussed at 10 million bpd, the global demand is down 20 percent or 20 million bpd in 2020 till now. Production cuts can help only so much because there is also the problem of weak demand resulting from lockdowns and curbs on travel and transportation in many countries.

Vikas Halan of Moody's is optimistic about prices in the second half of 2020. His worst-case scenario estimates the price at $30 a barrel. But he sees a high possibility of Brent crude recovering to $40-45 a barrel as demand recovers.

A bigger issue though is the cut in capital expenditure by the oil producers, according to Moody's. Oil companies are facing huge losses and there is pressure on their balance sheet due to the near halving of crude prices in 2020 so far. The real test according to him will come 12-18 months from now when things would have settled. Demand recovery will require more stocks, but the oil producers may not be in a position to produce.