LONDON: Several key OPEC members are leaning towards a bigger than previously expected oil output cut, four sources with knowledge of the talks said, as oil prices fell to $50 per barrel on fears the coronavirus outbreak will hit oil demand badly.
Members including Saudi Arabia are considering agreeing an output cut of 1 million barrels per day for the second quarter of 2020, more than an initially proposed cut of 600,000 bpd, the sources said.
The Financial Times newspaper was first to report the deeper cut idea. The virus has caused almost 2,800 deaths in China and has spread to dozens of other countries.
Oil has slid by almost 25 percent this year on lower demand and slower expected economic growth, alarming OPEC members.
OPEC and allies including Russia, a grouping known as OPEC+, are curbing oil output by 1.7 million barrels per day (bpd) until the end of March.
They are scheduled to meet on March 5-6 in Vienna to decide further policy. Meanwhile oil prices slumped for a sixth day in a row on Friday to their lowest in more than a year, causing futures to drop by the most in a week since 2016, as the spread of coronavirus stoked fears that a slowing global economy would hit energy demand.
The coronavirus spread further, with cases reported for the first time in six countries across three continents, battering markets and leading the World Health Organization (WHO) to raise its impact risk alert to “very high.”
The most active Brent future for May LCOc2 delivery fell $2.06, or 4.0 percent, to settle at $49.67 a barrel, its lowest since July 2017.
Brent LCOc1 futures for April delivery, meanwhile, lost $1.66, or 3.2 percent, to settle at $50.52 a barrel, while U.S. West Texas Intermediate (WTI) crude CLc1 fell $2.33, or 5.0 percent, to settle at $44.76. That is the lowest closes for both Brent and WTI since December 2018.
For the week, Brent lost almost 14 percent, its biggest weekly percentage decline since January 2016, while WTI fell over 16 percent in its biggest weekly percentage drop since December 2008.
Coronavirus panic also sent global stock markets and industrial and precious metals prices tumbling, with losses amounting to $5 trillion.
“Virtually all fixed assets are attempting to accurately discount GDP and demand impact from the coronavirus that still appears to be spreading rather than contracting,” Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois, said in a report.
Mainland China reported 327 new cases, the lowest in more than a month, but the outbreak surged elsewhere. The latest WHO figures indicate over 82,000 people have been infected, with over 2,700 deaths in China and 57 deaths in 46 other countries.
Benchmark Brent crude’s slump should focus minds on next week’s meeting between the Organization of the Petroleum Exporting Countries and allies including Russia, collectively known as OPEC+.
“OPEC+ will have to deliver a deeper production cut as oil prices remain in freefall,” Edward Moya, senior market analyst at OANDA in New York, said in a report.
Several key OPEC members are leaning toward a bigger than previously expected oil output cut, four sources with knowledge of the talks said.
Saudi Arabia, the biggest producer in OPEC, and some other members are considering a cut of 1 million barrels per day (bpd) for the second quarter of 2020, up from an initially proposed cut of 600,000 bpd, the sources said.
OPEC+ is due to meet in Vienna over March 5-6.
In a related development, Russian oil production, including gas condensate, stood at 11.29 million barrels per day (bpd) over Feb. 1-27, a source familiar with preliminary data told Reuters, as markets await news on whether Moscow will join OPEC in making further production cuts.
The preliminary figure is broadly in line with the 11.28 million bpd pumped in January but higher than Russia’s average output last year. Russia’s highest monthly oil production of 11.45 million bpd was recorded in December 2018.
From late last year Russia was allowed to exclude production of gas condensate, a form of light oil, from its quota in the existing oil supply pact between OPEC and its allies - known as OPEC+ - but it continues to report a combined figure with no breakdown.
Russia’s current oil production quota stands at 10.33 million bpd excluding gas condensate. It was not immediately clear from the preliminary figures how Moscow complies with its obligations under the OPEC+ deal. Russia reports official February data on March 2. The energy ministry did not reply immediately to a Reuters request for a comment.
