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A significant development this week…
The technical panel of the OPEC+ group recommended extending the oil production cuts agreed last December to the end of 2020, the current president of OPEC, Algeria’s oil minister, told media on Sunday. The group last week also recommended deeper cuts—of 600,000 bpd—to last until the end of Q2.
Countering the potentially positive implications of this news, however, Oil and Gas Middle East quoted Russia’s Energy Minister Alexander Novak as saying that Moscow needed more time to decide whether it will jump on board. At the time Novak was referring to the deeper cuts.
"[We do] not fully understand the situation and clear forecasts for the development of events in connection with coronavirus," Novak said last week as quoted by the media. "To do this, more time is needed to see how the situation will develop, what [the] impact will be on world markets for oil."
The official added there was still no evidence of a negative impact on Russian oil ands gas exports to China from the coronavirus outbreak.
At the time of writing, it was as of yet uncertain if OPEC+ will even hold another emergency meeting before its originally scheduled one in March because of Russia’s reluctance to commit to further cuts, Bloomberg reported.
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Meanwhile, Algeria’s top oil man, Mohamed Arkab, told Reuters “The coronavirus epidemic has a negative impact on economic activities, especially on the transport, tourism and industry, in China particularly, and also increasingly in the Asian region and gradually in the world,” which should motivate deeper and longer cuts in oil production.
An S&P Global Platts survey found last week OPEC that production in January had fallen by 470,000 bpd from December. Yet this has not been enough to prop up prices so far, even coupled with the news that Libya’s oil production is now less than 200,000 bpd, down from 1.2 million bpd at the start of the year, due to the continued oil port blockade.
OPEC and several other oil producers led by Russia last December agreed to extend their production cuts of 1.2 million bpd until the end of March and the then decide on next steps. However, the coronavirus outbreak prompted an emergency meeting, at which OPEC came up with the proposal to deepen the cuts by another 600,000 bpd. As with the previous agreement, Russia will make or break the additional cuts.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.