By Adedapo Adesanya
Major crude futures prices continued to fall on Monday as Russia delayed its decision on the additional output cuts suggested by the Organization of the Petroleum Exporting Countries (OPEC) and its allies.
The group is proposing to further cut output by 600,000 barrels per day to counter the effect of the coronavirus on global oil demand, but Russia is very adamant on this.
This further pull down the price of the Brent crude, which is the international benchmark, by $1.20 or 2.18 percent on Monday night to trade at $53.27 per barrel, while the US West Texas Intermediate (WTI) crude dropped below $50 after losing 79 cents or 1.57 percent to settle at $49.53 per barrel.
The OPEC+ joint technical committee last week weighed the effect of the coronavirus outbreak on demand loss as OPEC and its allies are struggling to contain the oil market.
The technical panel then recommended extending the oil production cuts agreed last December by a further 600,000 bpd that will bring total of production cuts to 2.3 million barrels and will last until the end of June 2020.
However, Russia’s Energy Minister Alexander Novak said that the leader of the allies needed more time to decide whether it will jump on the new deal.
“We do not fully understand the situation and clear forecasts for the development of events in connection with coronavirus.
“To do this, more time is needed to see how the situation will develop, what the impact will be on world markets for oil,” Mr Novak said last week.
The coronavirus epidemic has negatively impacted economic activities, especially on the transport, tourism and industry in the largest importer of oil, China and by extension in the Asian region and gradually in the world, which, according to those in support of the OPEC move, is why there was a need for deeper and longer cuts in oil production.
However, Russia as a major player can either make or break the additional cuts because as an ally to the cartel, their decision could help prices rally or fall further and as it delays, prices are edging lower.
The current OPEC+ output agreement in December called for a reduction of 1.7 million barrels a day since the beginning of 2020 and has so far been scheduled to run through the end of March so there can be stable prices and control of oversupply oversupply but the virus outbreak has rendered this ineffective.
The latest numbers showed that death toll from the coronavirus outbreak in has risen close to 1,000, with 40,000 people infected and has spread to almost 30 countries.
