OPEC is inclined to extend the ongoing production cuts at least through June and could discuss deeper cuts if need be, OPEC sources told Reuters on Tuesday, as oil prices continue to slide on fears that the coronavirus outbreak in China will impact oil demand.
OPEC is very likely to extend until June the current cuts, which expire in March, one source in OPEC told Reuters, while another added that “A further extension is a strong possibility and a deeper cut is a possibility.”
The cartel could also consider rolling over the cuts as-is until the end of the year, or even deepen the cuts if the demand destruction turns out to be significant, according to the sources.
Even Russia—which has always been OPEC’s reluctant partner agreeing to rollover of the cuts at each OPEC+ meeting at the very last moment and which is said to want out after March—is reportedly considering staying in the pact if oil prices continue to be below $60 a barrel.
Oil prices have dropped by around 10 percent since the first reports of the deadly coronavirus came out of China last week.
On Monday, OPEC’s leader Saudi Arabia tried to jawbone the market higher, and the United Arab Emirates (UAE) chimed in to downplay what it called a “market over-reaction” over fears that the virus will erode oil demand in China—the world’s largest oil importer and main oil demand growth driver.
But while the leading OPEC producers downplayed fears of crippled demand growth in an attempt to calm the oil market, the cartel was said to be considering extending the production cuts or even deepening them to stave off excessive price slides due to the coronavirus outbreak in China, an OPEC source told S&P Global Platts on Monday.
OPEC and its Russia-led non-OPEC partners are meeting in early March to decide how to proceed with the cuts. OPEC members were already said to be discussing a potential extension of the oil production cuts through the end of 2020, because of the still bearish outlook on oil demand growth, an OPEC source told Russian news agency TASS last week.
By Tsvetana Paraskova for Oilprice.com
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