OPEC + cannot agree on a sharp cut in supplies, oil prices fell to 2017 lows
On Friday, OPEC and its non-member allies were unable to agree on how much to cut oil production in the wake of the coronavirus outbreak. Russia Reportedly Refuses to Green Light Biggest Supply Cuts Since Global Financial Crisis.
Oil prices declined on Friday afternoon amid reports that Moscow says it is not ready to approve further production cuts. Later, Reuters also reported that OPEC and its allies could not even agree to postpone the existing deadlines for existing supply cuts, further affecting oil prices. The oil group then said in a statement that it would continue discussions, but there was no mention of any details on how to deal with the cuts..
Russian Energy Minister Alexander Novak told journalists leaving the Vienna meeting that this means members of the organization can now download whatever they like starting April 1.
«We made this decision because there was no common understanding of how all 24 countries should simultaneously respond to the current situation. Thus, from April 1, we begin to work without taking into account quotas or reductions that took place earlier, but this does not mean that each country will not track and analyze the development of the market.» – he said.
Brent international brent fell to $ 45.46 on Friday afternoon, down more than 8%, while West Texas Intermediate dropped to $ 41.93, also about 8%. Both indicators traded at lows not seen since 2017.
Brent futures have dropped more than 30% since rallying to a peak in early January, while WTI is down nearly a third over that period..
OPEC on Thursday recommended additional production cuts of 1.5 million barrels a day from early next month to the end of the year. OPEC group of 14 members scheduled to meet on June 9 to review current policy.
The proposal was driven by support from non-OPEC manufacturers, including Russia. OPEC warned that the deal could only be negotiated on a pro rata basis, with major members planning to cut 1 million bpd and non-OPEC partners expecting 500,000 bpd cuts.
Analysts consider the meeting between OPEC members and non-OPEC manufacturers, called OPEC, to be extremely important+.
«For this organization, this is a really important moment, or even a moment of truth.», – Helima Croft, head of global commodities strategy at RBC, said Friday morning to CNBC’s Dan Murphy. «If Russia says today «not», then there will be real questions about the viability of the OPEC agreement+».
Once again, disagreements between OPEC’s locomotive, Saudi Arabia, and Russia, the leader of non-OPEC countries, test the strength of their three-year energy alliance.
Croft said she believed the preservation of economic interests in the organization was linked to both the economic and political interests of Moscow., «but now a lot is hanging in the air».
«We have no reason to doubt the continued commitment of the Russian Federation to this partnership.», – OPEC Secretary General Mohammed Barkindo told reporters Thursday night.
«We have repeatedly heard from the top leadership of the Russian Federation about the government’s commitment to this partnership in a declaration of cooperation», – he added.
Speaking to reporters shortly after OPEC recommended removing 1.5 million bpd from the market for the remainder of the year, Iranian Oil Minister Bijan Zanganeh admitted that the group «no plan B», if Russia or other non-OPEC members refuse to accept the deal.
Oil producing countries first pledged to curb collective production policies in 2016 to support oil prices. This agreement entered into force in January 2017.
It was extended last December and the alliance agreed to cut oil production by about 1.7 million barrels per day. Then Saudi Arabia decided to voluntarily cut its own production by another 400,000 barrels per day for a three-month period if colleagues fulfill their obligations..