By Adedapo Adesanya
Oil prices crashed more than 9 percent to their lowest level in nearly three years on Friday night as major producing nations failed to agree on supply cuts.
The final meeting between the members of the Organisation of the Petroleum Exporting Countries (OPEC) and its allies led by Russia ended in no deal, sending markets to the southern pole.
Brent and WTI crude futures tumbled by nearly $5 a barrel after the outcome of the meeting was made public. Brent crude was down $4.40 or 8.80 percent at $45.58 per barrel, while the US West Texas Intermediate (WTI) was down $4.24 or 9.24 percent at $41.46 per barrel.
This means that prices hit their lowest level since 2017, the year in which OPEC and its non-OPEC allies led by Russia began their production cut deal to try to stop oversupply on the market and prop up oil prices.
But with this disagreement yesterday, oil producers are no longer restricted by any further deal by the end of March 2020 and could continue pumping crude at any level, which may further crash prices due to oversupply in the market.
On Thursday, OPEC’s oil ministers met and recommended that the OPEC+ alliance extend the current cuts through the end of 2020 and deepen those cuts by 1.5 million barrels per day in the second quarter of the year in response to the decline in demand due to the coronavirus outbreak.
Later on Thursday, OPEC ministers met again and decided that the 1.5 million barrels per day additional cut should not be only for Q2 but for the rest of 2020 as well.
However, at the meeting between both factions on Friday, the deal became too difficult for Russia and none of the side was willing to give in.
Russia continued to insist that no additional cuts should be made, while OPEC and its leader, Saudi Arabia, insisted on further cuts, but this didn’t end well as a refusal put an end to talks.
OPEC Secretary General, Mr Mohammed Barkindo, speaking to reporters after the meeting broke up, said there was no consensus to extend the policy of supply restraint beyond the end of March and OPEC would not act on its own. He then hinted that there would be further discussions but did not elaborate.
Meanwhile Russian Energy Minister, Mr Alexander Novak, said following this, producers would make their own decisions on what to do from April 1 and analysts see them pushing out more output that could lead prices to plunge further to $30 per barrel.
