OPEC backs biggest oil output cut since 2008 crisis, awaits Russia

Saudi Arabia wants OPEC and allies to cut 1 million to 1.5 million bpd for second quarter

VIENNA: The Organisation of the Petroleum Exporting Countries (OPEC) agreed on Thursday to cut oil output by an extra 1.5 million barrels per day (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 OPEC 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 1.7 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 till now 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 will take part in the OPEC+ ministerial meeting in Vienna on Friday.

OPEC said 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 non-OPEC states were expected to contribute 500,000 bpd. The group said this was in addition to extending the existing supply curbs to the end of 2020.

OPEC holds 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.

In a sign that bargaining was not over, Russian Finance Minister Anton Siluanov said Moscow had still not reached a deal with OPEC and it was ready for a possible drop in oil prices.