VIENNA (Reuters) – OPEC’s plans for deep and prolonged oil cuts were derailed on Friday 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.
A high-level Russian source and two OPEC sources told Reuters Russian Energy Minister Alexander Novak told OPEC that Moscow was only ready to discuss extending existing output cuts.
“That position won’t change,” the Russian source said as ministers from OPEC, Russia and other producers, a group known as OPEC+, gathered for crunch talks at OPEC’s Vienna headquarters.
OPEC ministers said the coronavirus outbreak had 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 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, a much bigger and more extended move than expected, but they made the proposal conditional on Russia and other non-OPEC producers backing the curbs.
Novak has made no public statements about the proposed extra cuts during his trips to and from Vienna this week.
Existing cuts by OPEC+ amount to 2.1 million bpd, but those have failed to support oil prices which have lost a quarter of their value since the start of the year.
“There is a problem. OPEC has no intention to cut without Russia. We need to do something or the consequences will be drastic for everyone,” a source from a Gulf producer said.
The Kremlin said on Friday President Vladimir Putin had no plans to talk to the Saudi leadership, dashing hopes that a deal could be clinched at the very top.
But inside the OPEC headquarters informal consultations continued for more than four hours. One delegate said he saw some positive signs that a compromise could be reached.
The official meeting of OPEC+ ministers was delayed for several hours from its scheduled start at 0900 GMT.
Libya’s representative at the talks, National Oil Corporation Chairman Mustafa Sanallah, left the OPEC building telling reporters, “No white smoke yet”, referring to the means used by the Vatican to announce a new pope has been chosen.
Iranian Oil Minister Bijan Zanganeh, whose country is a member of OPEC but exempted from any curbs, had said earlier on Thursday that OPEC was still working with Russia and other non-OPEC states to reach a deal, the SHANA news agency reported.
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The proposed new cuts would be on top of existing curbs due to expire in March. OPEC ministers have also called for extending the existing deal, taking total supply reductions to about 3.6 million bpd or about 3.6% of global supplies.
Moscow’s decision not to back the additional curbs could undermine cooperation between the Organization of the Petroleum Exporting Countries and Russia, an informal alliance that has propped up oil prices since 2016.
Oil prices extended their decline after the comment by the high-level Russian source. Brent fell as much as 5% on Friday to below $48 a barrel.
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