The oil-producing countries of the OPEC cartel are calling for a deep production cut, in a March 4, 2020 story. (Photo by THE ASSOCIATED PRESS)

OPEC calls for big production cut, but will Russia agree?

VIENNA — The oil-producing countries of the OPEC cartel are calling for a deep production cut of 1.5 million barrels per day to support prices that are sagging due to the spread of the coronavirus.

The proposal assumes non-member allies including major producer Russia will agree; they take up the proposal Friday.

Iranian Oil Minister Bijan Zangeneh said at Thursday’s meeting in Vienna that the cut would be for the second quarter of this year, and would be “subject to the acceptance” of non-OPEC allies, which have in recent years been co-ordinating cuts with the cartel.

OPEC issued a statement saying that member countries would cut 1 million barrels per day, while non-members would share a further cut of 500,000 barrels per day.

Saudi Oil Minister Prince Abdulaziz bin Salman, asked as he left the meeting if Russia was on board, said: “We’ll see tomorrow.”

The meeting of oil ministers from OPEC’s 14 countries was visibly affected by the coronavirus as journalists were barred from the headquarters building. They instead set up outside the venue and sought to briefly interview officials arriving for the meeting.

Producing countries are trying to shore up prices amid falling demand. Since the new coronavirus outbreak began in China last month, air travel to the country — the world’s second-largest economy — has all but stopped, sapping demand for aviation fuel. Manufacturing output, meanwhile, fell sharply as cities with millions of residents locked down to contain the spread of the virus. Major companies around the world have halted business travel out of precaution.

Oil prices stabilized ahead of this week’s meeting on expectations that deeper cuts would be agreed. The consensus in the markets had been at least 1 million barrels per day, on top of existing cuts. Crude prices have fallen 25% since January. The international benchmark for crude was trading at $50.83 a barrel on Thursday, down from around $69 at the start of the year.

In December, OPEC oil-producing countries and Russia agreed to cut production by 1.7 million barrels per day, up from the 1.2 million barrel per day cut they had been observing for the previous three years.

Russia, however, appears reluctant to sign up to more cuts. Iran’s Zangeneh told the Shana news agency this week Moscow “would resist until the last moment” any production decreases.

Countries have been abiding by the recent cuts unevenly, with some nations quietly producing more than they agreed to. And OPEC’s decisions to cut production have dwindling ability to boost oil prices, in part because the U.S. has been flooding the market with cheaply-produced crude.

By The Associated Press

oil and gas

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