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The OPEC meeting of ministers from OPEC, Russia, and other non-OPEC producers ended its meeting day without agreeing on a solution to the coronavirus problem, with Russia holding out, an OPEC source told Reuters on Wednesday afternoon, raising doubts that the group will get a bigger cut deal done after all.
While Saudi Arabia and a few others had pushed hard for additional cuts—some as much as 1.5 million barrels per day—through the second quarter, Russia, who sits in a better place budget-wise to withstand lower oil prices, instead lobbied to merely keep the existing cuts in place through the end of the second quarter.
And while President Vladimir Putin earlier this week said that Russia was willing to continue its cooperation with the OPEC+ group, it is no secret that the Russian oil companies were not eager to sign on to additional cuts.
Russian Energy Minister Alexander Novak left the Joint Ministerial Monitoring Committee meeting today after discussing the proposals for three hours.
Russia’s reluctance to sign on to cut even more oil production does not bode well for the oil markets, which have taken a severe beating by the coronavirus since the beginning of the year. Analysts have surmised that the markets were already pricing in additional cuts by OPEC+, and any failure to fulfill market expectations could have a profound negative effect on oil prices.
OPEC has routinely pulled out a win in the eleventh hour, so all hope is not lost, and the bump in the road that is Russia may serve to successfully manage expectations in a market that was primed for a cut between 600,000 bpd and 1 million bpd.
Last week, rumors surfaced that Saudi Arabia and two other OPEC members would be willing to go it alone should Russia fail to jump on board with additional cuts.
By Julianne Geiger for Oilprice.com
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Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group.