OPEC seeks 1.5% global oil production cut

Friday, 06 Mar, 2020

The Organization of Petroleum Exporting Countries (OPEC) and its allies are estimated to make an additional oil production cut of 1 million barrels per day (bpd) this week, an expert told Anadolu Agency on Thursday.

OPEC's output last month was the lowest since 2009, when the group implemented the sharpest production cuts in its history at the depths of the global financial crisis.

Meanwhile, Bank of America's Global Commodity Research team on Sunday lowered its 2020 price forecasts for both Brent and West Texas Intermediate to $54 and $49 a barrel, respectively, down from $62 and $57, due to fading gross domestic product growth caused by the COVID-19 outbreak. On Thursday, global benchmark Brent rose 0.6% on news of OPEC's plan but gave up most of those gains on hint that Russian Federation was yet to sign up.

The OPEC extraordinary two-day meeting takes place Thursday and Friday in the capital of Austria, which itself has recorded nearly 30 cases of the new coronavirus nationwide.

If they agree to remove an extra 1.5 million bpd from the market, it would bring the group's overall output reduction to 3.6 million bpd or about 3.6 percent of global supplies.

OPEC hold its next ministerial meeting on June 9.

He noted, however, that Russian Federation - which is not part of OPEC and would join the discussions on Friday - "would resist until the last moment" any production cuts.

Oil prices edged lower on Thursday as the coronavirus epidemic showed no signs of slowing, with deaths mounting globally, but losses were limited as major producers agreed on deeper output cuts to bolster prices.

He said, "tomorrow, everything depends on the non-OPEC agreement to accept to cut for half a million barrels for the second quarter", adding, "If they do not accept it we have no deal". With the prospect of extended OPEC supply cuts, however, the selloff in crude oil might stabilize. Siluanov did not say what Russia's decision in regard to deeper oil output cuts might be.

"Whether Russia will agree to the cuts is the million-dollar question".

Oil demand has been hit hard by the coronavirus outbreak.

Oslo-based Rystad Energy now predicts global oil demand will grow by 500,000 bpd in 2020, down from a February forecast of 820,000 bpd.

Russia's oil exports to China were nearly unaffected last month amid the coronavirus outbreak as the East Asian country has been benefiting from lower oil prices and building its strategic oil reserves, Chris Weafer, founder of Macro-Advisory in Moscow, told New Europe on 4 March.

Capital Economics declared in its report on Wednesday that as coronavirus has spread rapidly outside China, economic disruption worldwide has mounted.