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OPEC+ committee recommends 600,000 b/d in new oil cuts, but Russia wants to wait

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Additional cuts would go into effect for Q2

Russia's Novak says coronavirus impact still unclear

OPEC+'s March 5-6 meeting as scheduled for now

Vienna — Saudi-led efforts to implement deeper oil cuts to tackle the coronavirus' impact on the market remained in limbo Thursday, with key ally Russia not yet on board with a proposal for 600,000 b/d in new supply curbs.

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A technical committee of delegates advising a 23-country oil producer alliance issued the recommendation after three days of intense negotiations at the OPEC secretariat, but delegates said Russian representatives in the talks asked to return to Moscow for consultations with their leaders.

Earlier Thursday, Russian energy minister Alexander Novak said he was not ready to commit to any production changes.

"We need more time to see how the situation will develop, how it will impact the global oil market," Novak was quoted as saying by Russia's Prime news agency.

With no imminent action pending, OPEC+ ministers have kept their March 5-6 meeting in Vienna as scheduled for now, instead of moving it forward. Any deal would require unanimous approval of the entire OPEC+ coalition, composed of OPEC, Russia and nine other allies.

The Russian delay is sure to frustrate OPEC kingpin Saudi Arabia, which had called for the collective to immediately implement deeper cuts of 500,000 b/d or more amid the sell-off in crude prices.

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.

Saudi King Salman bin Abdulaziz spoke by phone with Russian President Vladimir Putin on Monday to press the kingdom's case for more cuts, and delegates were called to a hastily arranged two-day technical committee meeting in Vienna this week, raising market expectations of a deal.

The talks, which extended into a third day, included extensive reviews of several scenarios attempting to quantify the uncertain oil market impact of the still-spreading virus.

Besides Russia, Nigeria had also been resistant to participating in greater cuts, as it does not export much of its crude to China, according to Helima Croft, an analyst with RBC Capital Markets who was in Vienna to track the negotiations.

Crude prices dropped after the committee meeting ended with no definitive accord. At 1354 GMT, front-month ICE Brent futures had slid to $54.70/b, down 1.05% from Wednesday's close and almost 20% down from January 8, when China first revealed the virus outbreak.

'REAL ACTION'

Kremlin spokesman Dmitry Peskov said Thursday that no further calls between the Russian and Saudi leaders were planned but a call could be quickly arranged if necessary.

Some delegates were still hopeful that a deal could be reached.

"There are different points of view, but we are converging on the need to have real action," one 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 committee's recommendation, issued in a report to OPEC+ ministers, calls for the 600,000 b/d in additional cuts to begin in April and run through June. It does not parcel out how the cuts should be shared, sources said.

The OPEC+ group's existing 1.7 million b/d cut accord, which is scheduled to expire at the end of March, would be also extended, bringing the total supply curbs to 2.3 million b/d.

Saudi Arabia, seeking higher oil prices as it attempts major economic reforms, has been overcomplying with its production quota by 400,000 b/d, as well.