Russian Stance Thwarts OPEC’s Efforts to Protect Oil Market
Oil prices tanked over 8% on Friday and hit their lowest since mid-2017 after Russia balked at OPEC's proposed steep production cuts to stabilize prices.
OPEC's plans for deep and prolonged oil cuts were derailed as non-OPEC Russia refused to support the move arguing that it was too early to predict the impact of a coronavirus outbreak on global energy demand, sources told Reuters.
Three years of cooperation between the Organization of the Petroleum Exporting Countries and Russia ended in acrimony.
"The deal is dead," one OPEC source said.
As a result, the existing deal for output cuts will expire in March, so OPEC members and non-OPEC producers can then in theory pump at will in an already oversupplied market, sources said.
OPEC ministers had said on Thursday that the coronavirus outbreak created an "unprecedented situation" that demanded action, as measures to stop the virus spreading dampens global economic activity and oil demand.
Forecasts for 2020 demand growth have been slashed but Moscow has long argued it was too early to assess the impact and sources said Russian Energy Minister Alexander Novak delivered the same message on Friday.
OPEC ministers said on Thursday they backed an additional 1.5 million barrels per day (bpd) of oil cuts until the end of 2020, equal to around 1.5 percent of global demand, a much bigger and more extended move than expected.
They also called for extending existing OPEC+ cuts of 2.1 million bpd, meaning the proposed combined total of the cuts envisaged would have been 3.6 million bpd or about 3.6% of global supplies.
But they made the proposal conditional on Russia and other non-OPEC producers backing the curbs.
Novak, who held bilateral discussions with his Saudi counterpart Prince Abdulaziz bin Salman, has made no public statements about the oil cuts during his trips to and from Vienna this week.