Vienna — Russian energy minister Alexander Novak will be the oil market's most watched man Friday, when he arrives in Vienna for talks with OPEC, with the power to endorse or scuttle a plan for deep production cuts to tackle the coronavirus impact.
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OPEC late Thursday revealed a plan where it would slash its production quotas by 1 million b/d, contingent on Russia and nine other non-OPEC allies agreeing to shrink theirs by 500,000 b/d, for the rest of the year.
OPEC officials have said they expect difficult negotiations, as Novak has steadfastly refused to endorse any plan that would call for reining in further output. The talks are scheduled to begin around 10 am local time (0900 GMT).
"This is not going to be an easy meeting," UAE energy minister Suhail al-Mazrouei told reporters Friday morning ahead of the meeting. "I can not see us not agreeing, because that's very important for the market."
He added that in the absence of a deal, he did not envision OPEC acting unilaterally on production cuts, though Nigerian oil minister Timipre Sylva said "we will if we have to."
"That's really not going to be very good for us but we expect a deal," Sylva said.
Iranian oil minster Bijan Zanganeh reiterated his comments from Thursday that "we have no Plan B" if Russia rejects the proposal, while Saudi counterpart Prince Abdulaziz bin Salman did not speak to reporters.
On Wednesday, Novak co-chaired a nine-country OPEC+ advisory committee meeting in Vienna with Prince Abdulaziz but left to return to Moscow for further consultations with President Vladimir Putin, without committing to any cut deal.
Russia's stance has dismayed many OPEC members, particularly Saudi Arabia, who had been pushing for decisive action to instill market confidence in the alliance's efforts to confront the demand destruction caused by the coronavirus outbreak.
That led to Thursday's plan that was brokered by Prince Abdulaziz in an impromptu gathering with OPEC ministers and delegates in his hotel suite, following a flurry of bilateral meetings throughout the afternoon. Russia has not commented on the proposal.
"The ball is effectively back in the Kremlin's court," said Mohammad Darwazah, an analyst with Medley Global Advisers in Vienna to monitor the negotiations. "[Friday's] meeting could be tense, and as of Wednesday night, the bid-ask between the Russians and Saudis appeared to be wide."
Traders have already been positioning themselves.
The Brent/Dubai Exchange of Futures for Swaps spread shrank to its narrowest on record during Asian trading Friday morning, with front-month Brent prices continuing last night's slide on Russia's non-committal stance (See related story, 0418 GMT).
Dubai prices, meanwhile, have been supported in recent days on expectations of significant Middle East production cuts.
A narrow Brent/Dubai EFS implies relative tightness in the Middle East crude complex compared to Brent-linked grades.