Riyadh, Moscow move closer to record oil cut deal

Move aimed at lending support to prices hammered by coronavirus crisis

DUBAI/ MOSCOW: The Organisation of the Petroleum Exporting Countries (OPEC) and other oil nations held talks on Thursday on record production cuts of up to 20 million barrels per day (bpd), equivalent to about 20% of global supplies, to support prices hammered by the coronavirus crisis, OPEC and Russian sources said.

Talks have been complicated by frictions between OPEC leader Saudi Arabia and non-OPEC’s Russia, but OPEC and Russian sources said they had managed to overcome differences.

“That is a global deal,” one OPEC source said, without specifying whether it would involve the participation of the United States, something Russia and OPEC producers have insisted on.

Global fuel demand has plunged as much as 30 million bpd, 30% of global supplies, as measures to fight the coronavirus have grounded aircraft, reduced vehicle usage and curbed economic activity.

Benchmark Brent crude oil prices hit an 18-year low last month and are trading around $35 a barrel, almost half their level at the end of 2019, dealing a severe blow to budgets of oil-producing nations and high-cost US shale oil industry.

US President Donald Trump said last week a deal he had brokered with Saudi Arabia and Russia could lead to cuts of 10 million to 15 million bpd, even that figure, lower than the one cited by sources on Thursday, was unprecedented.

The biggest one-off cut previously agreed by OPEC alone was 2.2 million bpd during the 2008 financial crisis.

OPEC sources have also indicated such a big cut was possible, if the US joined in. But Washington has yet to show it is ready to take part.

Kremlin spokesman Dmitry Peskov said a new deal on cuts was “hardly possible” without others participating.

Peskov was speaking before the start of a video conference between ministers from OPEC+ - which groups OPEC members, Russia and other oil producers - as well as additional participants.

The video conference began at 1425 GMT. The United States was invited but it was not clear if it joined in.

Washington has said US output was falling gradually due to lower prices, which Russia says is not the same as making cuts. It was not clear yet from what levels Moscow and Riyadh were proposing to agree to cut. Moscow had said cuts must be based on levels in the first quarter while Saudi Arabia had insisted on April, when its output jumped steeply.

Published in The Express Tribune, April 10^th, 2020.

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