Fitch sees Russia’s offer to prolong OPEC+ deal cutting oil prices

MOSCOW, Feb 14 (PRIME) -- The proposal of Russian oil companies to prolong the oil output reduction deal of OPEC and non-OPEC states for April–June at the current conditions is a non-action that may lead to further contraction of oil prices Dmitry Marinchenko, director for natural resources and commodities group of international rating agency Fitch, said late on Thursday.

The coronavirus outbreak in China led to contraction of demand for oil in the world, with the Brent oil price falling by 20% to U.S. $56 as compared with the highest price of January. On Wednesday, Lukoil’s First Deputy CEO Ravil Maganov said that the majority of Russian companies supported prolongation of the agreement for April–June with the current quotas.

“No one has serious doubt that the deal should be prolonged until the end of the year, so the proposal of the oil companies means doing nothing. But if the situation with the coronavirus does not stabilize until the next meeting (of OPEC and non-OPEC states), this decision may lead to further contraction of prices,” Marinchenko told PRIME.

“A decision to reduce the production not by 600,000 barrels, but by, say, 300,000 barrels could be a compromise.”

But if the coronavirus situation stabilizes in the next two weeks, further reduction of oil output will not be necessary, he added.

The technical committee of the countries discussed the situation ahead of schedule at the beginning of February, and experts recommended prolongation of the deal until the end of the year with a deeper reduction of production in April–June. Saudi Arabia stands for contraction of the oil output by 600,000 barrels per day more, but Russia is yet to define its position on the matter.

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