Two OPEC sources said that “the organization agreed, yesterday, to cut production by an additional 1.5 million barrels per day in the second quarter of 2020 to support prices, in light of the outbreak of the Corona virus, but it made it conditional on Russia’s accession.”
Expectations for oil demand were hit hard by the measures to contain the virus, disrupting factory activities, pushing back from travel and curbing other business activities. The prospects for oil demand growth in 2020 shrink, prompting OPEC to consider its biggest cut since the 2008 financial crisis.
Saudi Arabia has proposed that OPEC and its allies, including Russia, be reduced by up to 1.5 million barrels per day in the second quarter, with extending current cuts of 2.1 million barrels per day, which expires this month, until the end of 2020. Until now, Russia has hinted at its intention Support for the extension of the cut does not deepen it.
The Minister of Energy, Suhail Al Mazroui, said that “(OPEC) will not bear the burden of the cuts alone, and that the countries outside the participating organization must.” He added, “We are all together in this. So the decision will not be ours alone. ”
In the past, Moscow, which has been cooperating on production policy since 2016, as part of an informal group known as “OPEC +”, expressed its hesitation during the negotiations, but was participating in the last moments.
Two OPEC sources said, “Russia is open to deepening the cuts, not just extending them, but Moscow has not yet followed.”
Earlier, sources from «OPEC» indicated that the initial talks with Russia this week in Vienna are more difficult than before.
When asked what would happen if Russia refused to join the new cut when the “OPEC” and Russia and other producers from outside it met on Friday, an OPEC source said: “The worst scenario is (just) the extension.”
If the OPEC proposed cut is approved, this will be at the maximum of market expectations.
Brent crude prices gave up gains, to be traded near $ 51 a barrel, after initially increasing 0.6% on news of the OPEC cut plan. An additional reduction of 1.5 million barrels per day from OPEC would mean that the total production cuts applied by the group would be 3.6 million barrels per day, equivalent to about 3.6% of global supplies.
– Expectations for demand for crude were affected by the measures to contain Corona