By Adedapo Adesanya
As coronavirus continues to affect oil prices, Saudi Arabia has urged members of the Organisation of the Petroleum Exporting Countries (OPEC) to further cut production to one million barrel per day.
At a meeting held earlier this month, it was proposed that a further 600,000 should be cut by oil producers in the group, but Russia, which is one of the key members, is yet to accept.
The oil cartel is expected to meet on March 5 and 6, 2020 and ahead of the gathering, Financial Times is reporting that Saudi Arabia, one of the main leaders of OPEC, wants an additional one million barrels per day output cut.
Business Post understands that Saudi Arabia and Russia have so far failed to reach an agreement to cut oil production despite the coronavirus epidemic in China, Italy, South Korea and recently in producing members like Iran, Nigeria. The virus has so far spread to 50 countries and will surely affect affect demand as long as it remains.
Recently, there have been reports that the de-facto OPEC leader, Saudi Arabia, was holding talks with Kuwait and the United Arab Emirates (UAE) this week to discuss a possible joint production cut of as much as 300,000 barrels a day.
In the latest development, the kingdom is asking producers to sign up to a collective production cut of an additional one million barrels a day, higher than previously discussed 600,000 barrels per day.
According to FT, this plan was discussed during a visit by OPEC Secretary-General, Mr Mohammad Barkindo to the capital of Saudi Arabia, Riyadh recently, and is calculated to show that the group can respond to the sharp reduction in demand created by the virus that has since affected supply and stifle demand.
With this new proposal, Saudi Arabia is expected to carry the majority of the new cut, while Kuwait, UAE, and Russia would split the rest. There were no talks of other countries joining the planned cuts.
The latest deal is coming when the previous recommended deal has not yet been agreed due to Russia’s decision to understand the full extent of the coronavirus impact before commitment.
Although investors will be wanting to see the outcome of next week’s OPEC+ meetings before fully committing, oil prices have continued to chart lower with the International benchmark, Brent Crude currently at $50.54 per barrel while the US West Texas Intermediate (WTI) is trading at $45.49 per barrel.
