Oil futures: Crude plunges while Russia deliberates, market mulls fundamentals

London — 1208 GMT: Crude oil futures fell in the morning European trading session Friday amid reported differences within the alliance between OPEC and its allies over production cuts and the prospects for demand.

At 12:08 GMT May ICE Brent crude futures were down $2.15/b from Thursday's settle to $47.84/b while the NYMEX April light sweet crude contract fell $1.94/b to $43.96/b.

Russian Energy Minister Alexander Novak is expected to return to Vienna Friday to continue talks with OPEC, with OPEC officials saying they expect difficult negotiations. The talks were scheduled to start at 10 am local time (0900 GMT).

OPEC+ has recommended that the existing 1.7 million b/d production cut be extended through 2020 with an additional 1.5 million b/d cut implemented by the end of June, split 1 million b/d for OPEC and 500,000 b/d for non-OPEC.

Russia has refused so far to endorse any plan that would call for it to rein in output further. This has dismayed many OPEC members, especially Saudi Arabia, which has been pushing for decisive action to instill market confidence in the alliance's efforts to confront demand destruction caused by the COVID-19 coronavirus outbreak.

Stabilizing prices hinges upon further OPEC+ cuts.

"A weaker demand outlook could be mostly offset by greater supply losses (Libya, Venezuela, and likely deeper OPEC+ cuts for the second quarter) once it become clear the virus can be contained," Shin Kim, head of supply and production at S&P Global Platts Analytics, said. "This should generally keep Brent in the mid-to-low $50s/b range for the next few weeks," she said.

COVID-19 represents a curve ball that makes it impossible to reliably estimate demand, Helge Andre Martinsen, senior oil market analyst at Norwegian financial services group DNB, said.

Current prices are unsustainably low if looked at in the context of the last two years, he said. "The fear is that we will see inventory levels rising out of control and then end up with a distressed market, with nowhere to hide oil and prices getting hammered down."