OPEC, Russia Moving Closer to Big Oil Cut as Coronavirus Hits Demand

SEATTLE (Oil Monster): A panel of OPEC and its allies recommended cutting oil output by an extra 1 million barrels per day (bpd) on Tuesday signaling that Russia and Saudi Arabia were moving closer to a deal to prop up prices which have been hit by the coronavirus outbreak.

Saudi Arabia and some other OPEC members have been pushing for deeper cuts as crude prices have plunged 20% since the start of the year but had struggled to persuade Russia to support the additional reduction.

The Organization of the Petroleum Exporting Countries, Russia and other producers already have a deal in place to cut output from Jan. 1 by 2.1 million bpd, a figure that includes additional voluntary cuts by Saudi Arabia.

But that has not been enough to counter the impact of the virus on China, the world’s biggest oil importer, and on the global economy, as factories are disrupted, fewer people travel and other business slows, curbing oil demand.

To try to halt the spread of the virus, other international conferences around the world have been scrapped, prompting OPEC officials to consider whether their talks should be held in person or by video.

On Tuesday, the group said the number of delegates attending would be limited and journalists, who usually chase ministers, would be barred from OPEC’s Vienna headquarters.

“It will be difficult diplomatically. Ministers shake hands, hug, kiss (on cheeks). What will we do?” one delegate said.

Before this week’s meeting, sources said Saudi Arabia and some others producers had proposed extending the existing pact beyond its March expiry until the end of 2020 while also cutting another 1 million bpd of output only for the second quarter.

Russia, which has indicated support for an extension, has yet to swing behind the proposal for deeper cuts, even though oil prices have tumbled to about $51 a barrel LCOc1.

At that level, many OPEC states will struggle to balance their budgets, although President Vladimir Putin has said that the current price was acceptable to Moscow.

Courtesy: www.reuters.com