London — With oil demand crashing due to the coronavirus pandemic, the world's producers need to cooperate to rein in supply, Russian energy minister Alexander Novak said Thursday, urging countries outside the OPEC+ alliance to contribute output cuts.
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"In these conditions, prompt and timely measures are needed, and we need" joint efforts involving "all oil-producing countries" in order to reduce the substantial level of overproduction flooding the world market, he said in his opening remarks at an emergency OPEC+ meeting.
The alliance, led by Saudi Arabia and Russia, aims to clinch a production cut deal that could take 10 million b/d to 15 million b/d off the market, with hopes that the US, Canada and other countries could also participate, when energy ministers of the G20 nations meet Friday.
OPEC Secretary General Mohammed Barkindo said the coronavirus outbreak has "upended market supply and demand fundamentals."
The OPEC secretariat's analysis of the market now sees a 6.8 million b/d contraction in global oil demand for the whole of 2020, including close to 12 million b/d "and expanding" for the second quarter.
Non-OPEC production will fall 1.5 million b/d in 2020, not enough to make up for the plunge in demand, requiring OPEC+ members to step up efforts to balance the market, he said.
"These are staggering numbers," Barkindo told ministers at the OPEC+ meeting. "For the current quarter, around 15% of global oil consumption has evaporated and this huge market imbalance needs to be urgently addressed."
At current rates of supply and demand, global crude oil storage capacity will fill up in the month of May, he added.
Novak called the looming crunch in oil storage "alarming."
"All this can lead to serious consequences for the oil industry and the world economy as a whole," he said.
The ministers in the meeting are now in closed session.