Opec backs biggest oil cut since 2008 crisis; Russia says it’s okay with low prices
vienna — Opec agreed on Thursday to cut oil output by an extra 1.5 million bpd in the second quarter of 2020 to support prices that have been hit by the coronavirus outbreak, but made its action conditional on Russia and others joining in.
The oil demand outlook has been pummelled by global measures to halt the spread of the virus, prompting the Organization of the Petroleum Exporting Countries to consider its deepest cut since the 2008 financial crisis.
Demand growth forecasts in 2020 have been slashed as factories have been disrupted, people have been deterred from travelling and other business activity has slowed.
Saudi Arabia has been pushing Opec and its allies, including Russia, for a big cut up to 1.5 million bpd for the second quarter of 2020 while extending existing cuts of 2.1 million bpd, which expire this month, to the end of 2020.
But Riyadh, the biggest Opec producer, and other Opec states have struggled to persuade Russia to support the move. Moscow has, as at Press time, indicated it would back an extension but not a new cut.
Russia, which has cooperated on output policy since 2016 in the informal group known as Opec+, has in the past been hesitant during talks but has signed up at the last minute. Moscow was to take part in the Opec+ ministerial meeting in Vienna on Friday.
Opecsaid in a statement after its ministers met that the coronavirus outbreak created an “unprecedented situation” with risks “skewed to the downside”, adding that action was needed.
It said ministers agreed to an extra supply cut of 1.5 million bpd until June, out of which nonOpec states were expected to contribute 500,000 bpd. The group said this was in addition to extending existing supply curbs to the end of 2020. Opec hold its next ministerial meeting on June 9.
Opec sources have previously signalled that preliminary discussions with Russia about the cuts held this week in the Austrian capital had been trickier than before.
“The worst-case scenario is an extension,” said an Opec source when asked what would happen if Russia refused to join a new cut on Friday.
Later on Thursday, Russian Finance Minister Anton Siluanov said the country is fiscally prepared to cope with a drop in oil prices. Siluanov did not say what Russia’s decision in regard to deeper oil output cuts might be.
In an interview published by the Tass news agency on Wednesday, Russian President Vladimir Putin blamed low oil prices on falling household incomes in Russia. —