VIENNA- 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 percent 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.
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.
A cut in U.S. interest rates on Tuesday offered only limited support for crude ahead of the OPEC meeting on Thursday and the wider OPEC+ meeting on Friday.
An OPEC+ panel, the Joint Technical Committee (JTC), meeting on Tuesday before oil ministers gather, effectively backed the Saudi proposal, according to a text of recommendation.
Russia is also a member of JTC, suggesting Moscow might also be leaning towards larger cuts.
Last month, the committee recommended a smaller 600,000 bpd cut but on Tuesday it said it supported an extra cut of up to 1 million bpd.
“We will discuss the possibility of a new substantial cut by withdrawing from the market the quantities that are not consumed due to the coronavirus (outbreak),” Algerian Oil Minister President Mohamed Arkab said before heading to Vienna. – Reuters
