Russia will not agree to steeper oil output cuts by OPEC

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Russia will not back an OPEC call for extra oil output cuts and will only agree to extending existing curbs, a Russian source said on Friday, threatening to derail a call by OPEC ministers for deeper reductions to cope with the coronavirus outbreak.

“That position won’t change,” the high-level Russian source told Reuters as ministers from OPEC, Russia and other producers, a group known as OPEC+, gathered for crunch talks at OPEC’s Vienna headquarters.

OPEC ministers had said on Thursday they backed an additional 1.5 million barrels per day (bpd) of oil cuts until the end of 2020, a much bigger and more extended move than expected, but they made the proposal conditional on Russia and other non-OPEC producers backing the curbs.

Iranian Oil Minister Bijan Zanganeh, whose country is a member of OPEC but exempted from any curbs, said on Thursday that OPEC was working with Russia and other non-OPEC states to reach a deal, the SHANA news agency reported.

The proposed new cuts would be on top of existing curbs of 2.1 million bpd under an OPEC+ deal due to expire in March. OPEC ministers have called for extending that deal as part of a new pact, taking total supply reductions to about 3.6 million bpd.

Moscow’s decision not to back the additional curbs could undermine cooperation between the Organization of the Petroleum Exporting Countries and Russia, an informal alliance that has propped up oil prices since 2016.

Oil prices tumbled about a $1 on the comment by the high-level Russian source, taking the price down below $48 a barrel and losing more than a quarter of its value since the
start of the year due to fears the virus would destroy oil demand.

Russian Energy Minister Alexander Novak, who was at the OPEC headquarters in talks with his counterparts in OPEC and other countries, has not made any public statement on any cuts since he travelled to and from Vienna this week.

OPEC’s proposal for deeper cuts had effectively presented an ultimatum to Moscow, which had long indicated that it was uneasy about any further reductions in oil output.

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