OPEC ministers agreed among themselves that oil production should be cut by 1.5 million barrels a day to offset the huge demand hit from the coronavirus epidemic, gambling that they can overcome Russian opposition that could block to the move. Ministers from the Organization of Petroleum Exporting Countries reached an agreement at talks in Vienna on Thursday, delegates said, but Russian Energy Minister Alexander Novak wasn’t present at the conference. On Wednesday, he left the city without giving his support to the production cut favored by Saudi Arabia, instead preferring to maintain current output levels. A third of the 1.5 million barrel-a-day cut would come from Russia and other non-OPEC allies and the deal is contingent on their backing, delegates said, asking not to be named because the talks were private. Those countries will arrive in the Austrian capital on Friday to discuss an agreement.
If Moscow continues to withhold its support, it’s unclear whether any cut would actually be implemented. Oil rallied initially, then erased gains to trade little changed at $51 a barrel as of 11:42 a.m. in London.
Demand Slump
With oil prices down more than 20% since the beginning of the year, the debate in Vienna between OPEC and its allies was being closely watched across the energy industry. The fortunes of resource-dependent economies from Africa to Asia, as well as corporate giants like Exxon Mobil Corp. and shale drillers in Texas, could turn on the cartel’s decision.
With flights canceled in Europe, schools closed in Japan, towns quarantined in Italy and a rising death toll from Iran to Washington state, the coronavirus crisis has gone global, and with it, its impact on energy demand. For only the fourth time in almost 40 years, oil consumption may not grow at all in 2020, according to a growing minority of traders, investors and analysts. Goldman Sachs Group Inc. on Tuesday became the first major Wall Street Bank to forecast a contraction in demand this year.