VIENNA – An OPEC technical committee and its allies (OPEC+) failed to reach a consensus on the need to cut oil production over the coronavirus outbreak.
The three-day meeting in Vienna, chaired by Saudi Arabia and Russia, ended on Thursday without an agreement between the parties.
Russia rejected a Saudi proposal to recommend a production cut of 600,000 barrels per day in the second quarter, sources close to the negotiation said.
Participants of the meetings said behind closed doors that there was an understanding that production levels will need to be cut, state-run Russian news agency Tass reported.
The Russian government said in Moscow that assessing the impact of the epidemic on the market will take time and authorities in the country had not formulated a position on the possible steps to take.
Energy Minister Alexander Novak told Interfax agency: “I can’t say now what we are or are not willing to do without fully understanding the situation and without clear forecasts about the development of the coronavirus situation.”
“Some time is needed for this in order to see how the situation will develop and what influence it will have on world markets, on oil,” he added when asked if Russia supports a new production cut.
Any measure requires the unanimous approval of the 23 oil ministers of the OPEC+ coalition, made up of the 10 OPEC partners, Russia and nine other allied producers.
Helima Croft, global head of commodity research for RBC Capital Markets, said: “Russia once again seems reluctant to take additional output action, but we believe that Saudi Arabia will ultimately be able to prevail if it remains convinced that deeper cuts are required to stabilize a market roiled by the coronavirus.”
She told EFE at OPEC headquarters that a disagreement would leave some tensions between the parties, since Russia is not part of OPEC and should not be able to veto its decisions.
The next ministerial meeting of the group is scheduled for March 5-6, although there were rumors circulating at OPEC headquarters in Vienna on Thursday about bringing the event forward to next week, Feb. 14-15, although they are unconfirmed.
If the Saudi position is imposed an additional cut of 600,000 barrels would be added to the current reduction of 1.7 million barrels per day (mbd), which was agreed in December.
Markets reacted cautiously to the news from Vienna and Moscow, with Brent Crude, the benchmark for Europe, at $54.95 per barrel at 1325 GMT, 0.6 percent less than at the close of Wednesday.
The expansion of the coronavirus has generated fears of a major economic slowdown in China, where quarantines and travel restrictions have caused a contraction in oil consumption.
With an additional cut producers hope to avoid an excess of supply and a greater fall in prices, which have fallen between 15 and 20 percent in the last weeks.
China, the world’s second largest economy, is the main driver of crude oil demand and OPEC+ is its main market.
The Asian country is the world’s largest importer of crude oil with about 10 mbd, with more than two-thirds of that crude oil coming from OPEC and its allies.