Saudi Arabia is pushing to make a substantial cut in oil production when Opec and its allies meet next week, as global energy producers scramble to respond to the coronavirus outbreak that has crippled demand. The kingdom is asking producers including Russia to sign up to a collective production cut of an additional 1m barrels a day, according to five people familiar with the talks, a significantly higher amount than provisionally discussed when the so-called Opec+ group agreed to convene. The plan, which was discussed during a visit by Opec secretary-general Mohammad Barkindo to Riyadh in recent days, is designed to show oil producers are able to respond to the sharp reduction in demand created by a virus that has paralysed global supply chains and stifled international travel.
Under the proposal, Saudi Arabia would account for the bulk of the new 1m b/d cut, while Kuwait, the United Arab Emirates and Russia would split the rest. The deal has not yet been agreed, however, with Moscow still hesitant to participate in a substantial cut when the full extent of the coronavirus impact is not yet known. Earlier this month a technical meeting of the top Opec and non-Opec members of the alliance recommended reducing production by an additional 600,000 b/d to help balance the market, but that was before the coronavirus had spread far beyond China ‘s borders.
‘T‘he market is a falling knife. We don’t know what will happen to demand in Europe or Asia.
Roger Diwan, IHS Markit
Brent crude, the international oil benchmark, has fallen to a year-low of close to $50 a barrel this week, dropping more than 10 per cent as coronavirus outbreaks have spread to northern Italy, South Korea and parts of California. On Friday Brent crude was trading at $50.75 a barrel.