UPDATE – OPEC+ fails to agree further cuts in oil production


By Ovunc Kutlu

ANKARA (AA) – OPEC and non-OPEC oil producing countries failed to agree on Friday to further cut their oil production levels after seven hours of negotiations.

Oil producing countries of the group dubbed as OPEC+ could not agree on deeper oil production cuts to mitigate the negative impact of coronavirus outbreak on weak global oil demand that raises the glut of supply in the oil market.

After holding five hours of bilateral negotiations, followed by an additional two hours of closed-door meeting among member states' delegations, the oil producing nations could not come up with a deal in the Austrian capital Vienna.

OPEC advised Thursday that the organization and its allies in non-OPEC should reduce their total oil production by an additional 1.5 million barrels per day (bpd) for the first half of 2020.

OPEC proposed it could reduce its total output by 1 million bpd if non-OPEC countries would lower their total production by 0.5 million bpd.

That proposal, however, failed after OPEC and non-OPEC could not find a way for how the proposed cuts would be distributed among their member states.

OPEC General Secretary Mohammed Barkindo said the 14-member cartel had a unanimous decision on extension of the current agreement until the end of this year, as well as raising the level of adjustment to 1.5 million bpd "in light of the deteriorating economic and market conditions."

"I believe that nobody in this room would like a relapse like we did have in 2014, 2015 and 2016 … We are focused on addressing the imbalance in the market and the deteriorating market conditions. For us to do that effectively and efficiently, we need everybody on board," he told reporters after the meeting.

Barkindo said although the meeting has concluded for Friday, consultations between OPEC and non-OPEC will continue. Noting that there was "a few voting issues," he added: "We need everybody onboard, unanimity!"

"This evening we will have some informal meetings. We are optimistic that we will be able to agree on how to proceed beyond this quarter," he said.

It remains a question for OPEC+ whether its current production cut of 1.7 million bpd of OPEC+ would be extended when it expires at the end of March 2020.

It is also unknown whether OPEC heavyweight Saudi Arabia would continue to voluntarily cut its individual production by another 400,000 bpd, which it said on December that its voluntary production curb depends on other members of alliance complying to their respective quotas.

Failure to reach a deal has also brought up questions whether the alliance between Saudi Arabia-led OPEC and Russia-spearheaded non-OPEC would continue in the future.

Asked whether the alliance was still intact, Barkindo said "There is no doubt that the boat is still very strong and still sailing with everybody onboard."

"Within non-OPEC, 90% of the members are also aligned with us," he said regarding OPEC's proposal to cut an additional 1.5 million bpd, and added "But some countries need to have further consultations with their capitals."

Russian Energy Minister Alexander Novak left OPEC+ Joint Ministerial Monitoring Committee before it was concluded on Wednesday and went to Moscow for further consultation with his government.

Barkindo said: "Russia is committed. They have worked very hard. They want to continue. They have to consult all their oil producing companies."

Novak told reporters after Friday's meeting that cooperation between the 24-member OPEC+ would continue, but also his comments left some room that Moscow could leave the alliance and raise its crude oil production in the second quarter of 2020.

"As of April 1, OPEC and non-OPEC oil producing countries' responsibilities to curb production will end. It is up to Russian companies' plans whether Russia will increase its oil production after that date."

Without Russia and non-OPEC onboard, on top of not extending the existing production cuts, means that there could be an additional 2.1 million bpd of crude oil in the market when the second quarter of 2020 begins.

Given that global oil demand remains weak due to coronavirus, the rising glut of supply in the market could push crude prices lower.

With no OPEC+ deal, crude oil prices showed massive losses of almost 10% late Friday.

Price of international benchmark Brent crude fell to as low as $45.29 per barrel at 1631GMT for a daily loss of 9.4%.

American benchmark West Texas Intermediate (WTI) plummeted to $41.77 a barrel at the same time for a 9% decline.