OPEC+ delegates see 600,000 b/d in new oil cuts as Russia asks for more time

Vienna — An advisory committee will suggest OPEC and its allies cut an additional 600,000 b/d of crude production in Q2 to combat the coronavirus-induced hit to global oil demand, with Russia saying it needs more time to study the proposal, according to a delegate involved in the talks.

Key oil producing countries led by Saudi Arabia and Russia would implement the cuts starting after the end of March, a delegate said in Vienna. The current agreement to cut 1.7 million b/d of crude since January expires at the end of March.

Russia asked for more time for consultations at home before committing to more cuts, another delegate said. The technical committee was still meeting in Vienna in the third day of talks.

Delegates advising the 23-country OPEC+ coalition reconvened in Vienna at 9 am local time (0800 GMT), with OPEC kingpin Saudi Arabia having proposed deeper production cuts and major non-OPEC producer Russia still reluctant to commit, according to sources involved in the discussions. Russia has instead suggested extending the coalition's existing supply accord for three months beyond its end-March expiry, said one delegate, who asked not to be named due to the sensitivity of the talks.

Earlier Thursday, Russian energy minster Alexander Novak said that Russia was not yet ready to announce a position on further action, the Prime news agency reported.

"I'm not ready now to tell you what we are prepared or not prepared to do without understanding the situation and clear forecasts on how the situation will play out due to the coronavirus. We need more time to see how the situation will develop, how it will impact the global oil market," Novak said when asked if Russia was ready to deepen oil cuts or extend the OPEC+ deal.

Kremlin spokesman Dmitry Peskov said that President Vladimir Putin does not currently have any plans to discuss the issue with Saudi King Salman bin Abdulaziz, but if necessary such a conversation can be arranged very quickly. On Monday the two heads of state discussed the global oil market and said they are ready for further coordinated action to ensure stability of global oil markets, according to a Kremlin statement released at the time.

'Real action'

"There are different points of view, but we are converging on the need to have real action," another delegate said. "We needed some time to evaluate and assess that. We are all flexible. This is a technical problem, not a political one."

The coronavirus has sparked fears of a major economic slowdown in China, the world's largest importer of crude, where quarantines and travel restrictions have caused a contraction in oil consumption. China sources some 70% of its crude imports from OPEC+ members, and its refineries are expected to slash runs by about 1 million b/d in February, according to S&P Global Platts Analytics.

The coalition has watched with alarm the sell-off in oil prices and called what was scheduled to be a two-day emergency meeting of its Joint Technical Committee this week to formulate a response.

The committee, co-chaired by Saudi Arabia and Russia, has met since Tuesday at the OPEC secretariat to review several scenarios projecting the viral outbreak's trajectory, including how its impact on oil demand would affect projects in each member country, according to delegates.

Several said they were confident that their deliberations would be finished by the end of Thursday, with much of the remaining work involving drafting a report with recommendations for ministers to review.

The next OPEC+ ministerial summit is set for March 5-6, but delegates have said it may be moved forward if immediate production cuts are agreed. No new meeting dates had been discussed by the committee, several said.

At 12:01 PM GMT, ICE April Brent was trading 28 cents higher at $55.56 from Wednesday's close, but was still down some 19% since the virus outbreak was first revealed on January 7. Nymex March WTI was up 38 cents at $51/b.